2014/15 Knowledge Sharing Program with Mexico

2014/15 Knowledge Sharing Program with Mexico: Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy www. ksp .go.kr

Ministry of Strategy and Finance Government Complex-Sejong, 477, Galmae-ro, Sejong Special Self-Governing City 30109, Korea Tel. 82-44-215-7762 www.mosf.go.kr Korea Development Institute 263 Namsejong-ro, Sejong Special Self-Governing city 30149, Korea Tel. 82-44-550-4114 www.kdi.re.kr

Knowledge Sharing Program www.ksp.go.kr

Center for International Development, KDI ISBN 978-89-8063-941-0 MINISTRY OF STRATEGY ISBN 978-89-8063-827-7(set) cid.kdi.re.kr AND FINANCE 2014/15 Knowledge Sharing Program with Mexico: Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy 2014/15 Knowledge Sharing Program with Mexico

Project Title Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy

Prepared by Korea Development Institute (KDI)

Supported by Ministry of Strategy and Finance (MOSF), Republic of Korea

Prepared for Government of the United Mexican States

In Cooperation with Mexican Agency for International Development Cooperation

Program Directors Siwook Lee, Executive Director, Center for International Development (CID), KDI Hong Tack Chun, Dean of KDI School of Public Policy and Management, Former Executive Director, CID, KDI Taihee Lee, Director, Center for International Development (CID), KDI

Program Officer Hyun Jeong Park, Research Associate, Division of Policy Planning & Consultation, KDI

Senior Advisor Young Ju Kim, Former Minister of Commerce, Industry and Energy, Republic of Korea

Project Manager Taihee Lee, Director, Center for International Development (CID), KDI

Authors Chapter 1. Hak-Min Kim, Professor, Soonchunhyang University Chapter 2. Seung Kwan Jang, Professor, Korea Polytechnic University Oscar Sandoval Torres, Tecnológico de Estudios Superiores de Jocotitlán Jorge Hernández Hernández, Tecnológico de Estudios Superiores de Coacalco Gilberto Ochoa Ortega, Universidad Politécnica del Valle de México Jessica Alejandra Espinosa Torres, Universidad Tecnológica de Tecámac Chapter 3. Kyong Soo Kim, Vice Chairman, Korea Display Industry Association José Alonso Huerta Cruz, Chief Executive Officer, Council of Science, Technology and Innovation for Hidalgo (CITNOVA) Chapter 4. Eunsang Cho, Research Fellow, Korea Research Institute for Vocational Education & Training Chapter 5 Sujin Kim, Assistant professor, Gyeongsang National University

English Editor Seoul Selection

Government Publications Registration Number 11-1051000-000607-01 ISBN 978-89-8063-941-0 94320 ISBN 978-89-8063-827-7 (set) Copyright ⓒ 2015 by Ministry of Strategy and Finance, Republic of Korea Government Publications Registration Number 11-1051000-000607-01

2014/15 Knowledge Sharing Program with Mexico: Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy

MINISTRY OF STRATEGY AND FINANCE Preface

In the 21st century, knowledge is one of the key determinants of a country’s level of socio-economic development. Based on this recognition, Korea’s Knowledge Sharing Program (KSP) was launched in 2004 by the Ministry of Strategy and Finance (MOSF) and the Korea Development Institute (KDI).

KSP aims to share Korea’s experience and knowledge with the partner countries to achieve mutual prosperity and cooperative partnership. Former high-ranking government officials are directly involved in the policy consultation to share their intimate knowledge of development challenges, and to complement the analytical work of policy experts and specialists who have extensive experience in their fields. The government officials and practitioners effectively pair up with their counterparts in the development partner countries to work jointly on pressing policy challenges and share development knowledge in the process. The program includes policy research, consultation and capacity-building activities, all in all to provide comprehensive and tailor-made assistance to the development partner countries in building a stable foundation and fostering capabilities to pursue self-sustainable growth.

In 2014, policy consultation and capacity building workshop were carried out with 29 partner countries covering over 100 research agendas. As a new partner country, Kyrgyz Republic, El Salvador, Guatemala, Cuba were selected in consideration of the country’s policy demand, growth potential, and strategic economic partnership.

The 2014/15 Knowledge Sharing Program with Mexico was carried out with the aim of exchanging socio-economic development experience of two countries for improving Mexico’s policy making capacity and achieving her socio-economic development. Under the MOU signed between the Ministry of Strategy and Finance of Korea and the Ministry of External Affairs of Mexico, the joint research and seminars were conducted in order to support the goal of “Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy”.

I would like to take this opportunity to express my sincere gratitude to Senior Advisor Mr. Young ju Kim, Project and Program Manager Director Taihee Lee, as well as the project consultants including Prof. Hak-Min Kim, Prof. Seung Kwan Jang, Dr. Kyong Soo Kim, Dr. Eunsang Cho, and Prof. Sujin Kim for their immense efforts in successfully completing the 2014/15 KSP with Mexico. I am also grateful to Executive Director Dr. Si Wook Lee, Former Executive Director Dr. Hong Tack Chun, and Program Officer Ms. Hyun Jeong Park, and all members of the Center for International Development, KDI for their hard work and dedication to this program. Lastly, I extend my warmest thanks to the Mexican counterparts, the Ministry of National Economy, National Innovation Office and other related agencies, program coordinators, and participants for showing active cooperation and great support.

In your hands is the publication of the results of the 2014/15 KSP with Mexico. I believe that KSP will serve as a valuable opportunity to further elevate mutual economic cooperation of Mexico and Korea to a new level. I sincerely hope the final research results on the selected areas could be fully utilized to support Mexico in achieving economic development goal in the near future.

Joon-Kyung Kim President Korea Development Institute Contents

2014/15 KSP with Mexico ...... 017 Executive Summary ...... 021

Chapter 1 Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State: Policy Suggestions for CLQ TP Master Plan

Summary ...... 028 1. Introduction ...... 030 1.1. Background and Purpose of Research ...... 030 1.2. Research Contents and Methodology ...... 032 2. Techno Park Concept and Development Process ...... 035 2.1. Concept and Relativity of Research ...... 035 2.2. World Techno Park Development ...... 037 2.3. Techno Park Development in Korea ...... 040 3. Case Study: Chungnam Techno Park Development ...... 043 3.1. Initial Ideas ...... 043 3.2. Contents of Chungnam Techno Park Master Plan ...... 045 3.3. Chungnam Techno Park Model ...... 046 3.4. Performance and Limits ...... 049 4. System of Major Business at Techno Park: Lessons from Chungnam Techno Park ...... 053 4.1. Business Incubation System ...... 053 4.2. Business Support System and Program ...... 054 4.3. Technology Commercialization System ...... 056 4.4. Regional Innovation System ...... 059 5. Regional Innovation in Colima ...... 062 5.1. Industry Analysis ...... 062 5.2. Regional Innovation Capacity of Colima ...... 064 5.3. Status and Issues of CLQ TP ...... 066 6. Subjects of CLQ TP Master Plan ...... 069 6.1. Participants of Master Plan ...... 069 6.2. Contents of CLQ TP Master Plan ...... 070 6.3. Timetable for Master Plan Development (Example) ...... 072 7. Conclusion and Future Issues ...... 072 7.1. Conclusion ...... 072 7.2. Future Issues ...... 073 References ...... 074

Chapter 2 Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico

Summary ...... 078 1. Overview of Mexico State ...... 081 1.1. Overview of Mexico ...... 081 1.2. Overview of Mexico State ...... 082 1.3. Industrial Overview of Mexico State ...... 083 1.4. Overview of Education ...... 087 2. HRD & IAC Development to Raise Korean SME Competitiveness ...... 099 2.1. Development of HRD and IAC Policies ...... 099 2.2. Government Policies for Professional Human Resource Development and IAC ...... 102 3. KPU’s IAC Programs to Raise SME Competitiveness ...... 108 3.1. Main Goals and Direction of KPU’s IAC Programs ...... 108 3.2. Infrastructure for Support of KPU’s IAC Programs ...... 109 3.3. LINC Program of KPU ...... 117 3.4. Organization & Main Achievements of IAC Program ...... 118 3.5. KPU's Practical Education ...... 121 4. Establishment of CAI Centers in Mexico State ...... 122 4.1. Direction of CAI Project for Strengthening SME Competitiveness ...... 122 4.2. Concept and Configuration of CAI Centers ...... 124 4.3. Process of CAI Center’s Establishment in Mexico State ...... 126 4.4. Organization for CAI Center Operation at University ...... 131 Contents

4.5. Cooperation Program for Exchanging Technologies and Products via Mexico-Korea CAI Committee ...... 133 4.6. Future Plan for Commencement of CAI Center and Recommendations ...... 134 References ...... 137

Chapter 3 Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities

Summary ...... 140 1. Introduction: Why Does Hidalgo Need Science, Technology & Innovation? ...... 142 2. Korea’s Experience and Approaches toward Hidalgo ...... 145 3. Innovation Resources of Hidalgo and Evaluation ...... 149 3.1. Economy and Industry of Hidalgo ...... 149 3.2. Human Resource Capacity ...... 151 3.3. Industrial-Academic Cooperation ...... 153 3.4. R&D Expenditures ...... 153 3.5. City of Knowledge Project ...... 155 3.6. Interim Evaluation of Innovation Resources and Related Policies ...... 159 4. KSP Consultation for Hidalgo - Process and Contents ...... 161 4.1. Contents of Research for Consultation ...... 161 4.2. Progress of Consultation ...... 162 5. Evaluation & Recommendations ...... 166 5.1. Evaluation of Hidalgo’s Policies ...... 166 5.2. Recommendations ...... 168 References ...... 176 Chapter 4 Suggestions for Establishing a Think Tank for VET and Lifelong Education

Summary ...... 180 1. Introduction ...... 180 2. Mexican VET and Challenges ...... 182 2.1. Introduction of Mexican VET ...... 182 2.2. Major VET Institutions ...... 185 3. VET Research Functions in Mexico ...... 188 3.1. COSDAC ...... 188 3.2. CONOCER ...... 190 3.3. DGFPT and CIDFORT ...... 190 3.4. DGETI and CNAD ...... 191 3.5. PROFORHCOM ...... 192 3.6. Evaluating Research Capacity and Deriving Research Needs ...... 192 4. Functions, Establishment Background, and Development Process of KRIVET ...... 194 4.1. Functions ...... 194 4.2. Establishment ...... 196 4.3. Development Process ...... 198 4.4. Research Achievements and Influences ...... 202 4.5. Implications ...... 214 5. Pilot Plan and Conclusion ...... 217 5.1. Pilot Plan ...... 217 References ...... 223

Chapter 5 Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds)

Summary ...... 226 1. Inquiry into the Subject Requested by Chihuahua State ...... 229 1.1. Introduction ...... 229 1.2. Overview of Chihuahua’s Die & Mold Industry ...... 236 Contents

1.3. University and Training Center in Chihuahua ...... 244 2. Korea’s Experience in Metal-mechanics SMEs ...... 247 2.1. 60 Year History of Korean Dies & Molds ...... 247 2.2. Status of Korean Dies & Molds ...... 250 2.3. Korea Die and Mold Industry Cooperative ...... 257 2.4. Die & Mold Department at Korea Polytechnics II ...... 261 3. Advisory Research Results ...... 264 3.1. Implications of Korea’s Experience ...... 264 3.2. Policy Recommendations ...... 265 References ...... 282 Contents | List of Tables

Chapter 1

Activities of Korean Researchers and Mexican Experts ...... 034 Ten Chapters of Chungnam Techno Park ...... 045 Budget of Chungnam Techno Park (1998-2007) ...... 047 Key Indicators of Chungnam Techno Park in 2007-09 ...... 052 Four Steps for Business Incubation at Chungnam Techno Park ...... 054 Checklist for Startup Support Services ...... 056 Cultural Factors for Sustainable RIS ...... 060 Major Industries of Colima State ...... 062

Chapter 2

Mexico’s Profile & Social Features ...... 081 Overview of Mexico State ...... 082 Mexico’s Economic Index ...... 083 Data on Institutions of Higher Education in Mexico State ...... 090 Transformation of Policies toward Human Resource Development ...... 100 KPU Achievements in IAC Programs ...... 120 Practical Education of KPU ...... 121 Procedure of Establishing CAI Center ...... 127 Plan for Establishing CAI Center at Each University ...... 128 Space Programs for CAI Center at TESJo ...... 128 Space Program for CAI Center at TESCo ...... 129 Space Programs for CAI Center at UTTEC ...... 130 Space Programs for CAI Center at UPVM ...... 131 Major Contents of CAI Center’s Opening Plan ...... 136

Chapter 3

Breakdown of Hidalgo’s Population (2013) ...... 151 Researchers in Hidalgo (2015) ...... 152 National Expenditures on Science & Technology in 2013 ...... 154 Venues Visited during Pilot Study in Mexico ...... 163 Venues Visited during Policy Demand Seminar in Korea ...... 164 Contents | List of Tables

Venues Visited during Additional Pilot Study in Mexico...... 164 Venues Visited during Interim Reporting & Policy Practitioners' Workshop in Korea ... 165

Chapter 4

Areas Covered by Center for HR Policies ...... 204 Projects Conducted by Center for HR Policies by Topic ...... 205 Projects Conducted in Job Creation Sector by Area ...... 207 Research Conducted on Employment and Skills Development Sector by Area ...... 208 Project Objects and Number of Projects Conducted by Area ...... 210 Projects Conducted in Career Education Sector ...... 211 Projects Conducted in Qualification Sector ...... 212 Projects Conducted in International Cooperation ...... 213 Pros and Cons of Four Establishment Scenarios ...... 219

Chapter 5

Auto Plants in Mexico ...... 233 Plastic Companies in Mexico ...... 234 Injection Machine Capacity of Chihuahua City ...... 236 Mold Market Size of Chihuahua City ...... 236 No. of Die & Mold Makers, Metal Mechanical Enterprises and 1st auto suppliers ...... 252 Mold Exports of Korea ...... 253 Major Mold Exporters and Importers ...... 253 Courses at Department of Die & Mold Design ...... 262 Contents | List of Figures

Chapter 1

[Figure 1-1] STP Types Based on Size and Function ...... 036 [Figure 1-2] Innovation Platform by Techno Park ...... 046 [Figure 1-3] Bird’s Eye View of Cheonan Valley, Chungnam Techno Park ...... 048 [Figure 1-4] Road Map of Chungnam Techno Park ...... 049 [Figure 1-5] Business Growth at Chungnam Techno Park ...... 050 [Figure 1-6] Growth Pattern of Chungnam Techno Park Startups (2000~09) ...... 051 [Figure 1-7] Contact Center Program at Chungnam Techno Park ...... 055 [Figure 1-8] Technology Commercialization by Techno Park ...... 057 [Figure 1-9] Compensation Program of Technology Holding Company ...... 058 [Figure 1-10] Completion Model of RIS ...... 061 [Figure 1-11] Proportion of Employees in Colima’s Industries ...... 063 [Figure 1-12] University of Colima Students by Major (2011) ...... 065 [Figure 1-13] Plan for CLQ TP with Triple Helix Complex ...... 066

Chapter 2

[Figure 2-1] Map of Mexico’s Neighbors and Major Cities ...... 082 [Figure 2-2] Mexico State’s Main Industrial Sectors ...... 084 [Figure 2-3] Satellite View of TESJo and Industries in Sphere of Influence ...... 085 [Figure 2-4] Main Industrial Sectors of Mexico State’s Northern Zone ...... 085 [Figure 2-5] Main Industrial Sectors in Mexico State’s Metropolitan Zone ...... 086 [Figure 2-6] Satellite View of Metropolitan Zone Industries & Area Universities ...... 086 [Figure 2-7] Construction Layout of Jocotitlan Technological Institute ...... 091 [Figure 2-8] Construction Layout of UTTEC ...... 093 [Figure 2-9] Construction Layout of TESCo ...... 095 [Figure 2-10] Construction of CAI Center Building ...... 095 [Figure 2-11] Construction Dormitories for IAC Program ...... 096 [Figure 2-12] Construction Layout of UPVM ...... 097 [Figure 2-13] LINC Project of Korean Ministry of Education ...... 103 [Figure 2-14] Direction of KPU’s IAC Program ...... 109 [Figure 2-15] Goal of TIP in KPU ...... 110 [Figure 2-16] Goal of QWL in KPU ...... 111 Contents | List of Figures

[Figure 2-17] Concept of Partner Company System in KPU ...... 112 [Figure 2-18] Concept of E/H in KPU ...... 113 [Figure 2-19] Status of E/H in KPU ...... 114 [Figure 2-20] Status of ESC in KPU ...... 114 [Figure 2-21] Overview of Nano-TIC in KPU ...... 115 [Figure 2-22] General Functions of TBI in KPU ...... 116 [Figure 2-23] Achievements of KPU’s TBI ...... 117 [Figure 2-24] LINC Programs of KPU ...... 118 [Figure 2-25] Structure of KPU Organization for Supporting IAC ...... 119 [Figure 2-26] Direction for Establishment of CAI Center ...... 124 [Figure 2-27] Concept and Configuration of CAI Centers ...... 125 [Figure 2-28] Organization of CAI Center ...... 132 [Figure 2-29] Organization of Next Stages ...... 133 [Figure 2-30] Short-term Plan for CAI Center Opening & Pilot Products ...... 135

Chapter 3

[Figure 3-1] Hidalgo’s Four Pillars of Knowledge-based Development Public Policy ...... 143 [Figure 3-2] Stages of Development: City of Knowledge, State of Hidalgo ...... 144 [Figure 3-3] Industrial Structure of Hidalgo (2013) ...... 149 [Figure 3-4] Employment Structure of Hidalgo (2014) ...... 150 [Figure 3-5] CITNOVA Budget as % of GDP (2011-14) ...... 154 [Figure 3-6] City of Knowledge ...... 155 [Figure 3-7] Highways of Hidalgo ...... 156 [Figure 3-8] Lack of Connectedness between City of Knowledge Actors ...... 168 [Figure 3-9] Innovation Hub Framework ...... 169 [Figure 3-10] Types of Policies ...... 173

Chapter 4

[Figure 4-1] Skills Development System: Key Agencies ...... 183 [Figure 4-2] VET Research Functions in Mexico ...... 189 [Figure 4-3] Organization of KRIVET ...... 195 [Figure 4-4] Development Process of KRIVET ...... 199 [Figure 4-5] KRIVET Research Budget ...... 203 [Figure 4-6] Comparison of Number of Projects Conducted by Center for HR Policies by Area in 2007 and 2011 ...... 206 [Figure 4-7] Comparison of Center for HR Policies’ Budget Spent by Area in 2007 and 2011 ...... 206 [Figure 4-8] Project Distribution in Vocational Education Sector ...... 209 [Figure 4-9] Research Functions of Mexican VET Think Tank ...... 220

Chapter 5

[Figure 5-1] Output of Mexico’s Auto Parts Industry ...... 231 [Figure 5-2] Location of Light and Heavy Vehicle OEMs in Mexico ...... 232 [Figure 5-3] Location of Steel Plants in Mexico ...... 234 [Figure 5-4] Global Machine Tool Production and Consumption ...... 235 [Figure 5-5] Rubber Mold, CBQ Technology ...... 241 [Figure 5-6] Chihuahua Institute of Technology and CENALTEC ...... 246 [Figure 5-7] 1st Lathe and 2014 machinery center of Whacheon ...... 248 [Figure 5-8] 60 years of Korean die and mold history ...... 250 [Figure 5-9] Die & Mold Exports and Imports of Korea over 20 Years ...... 250 [Figure 5-10] Production by Die & Mold Companies in 2012 ...... 251 [Figure 5-11] No. of Die & Mold Companies, 2012 ...... 252 [Figure 5-12] Die and Mold Exports of Korea ...... 254 [Figure 5-13] Major Mold Exporters and Importers ...... 254 [Figure 5-14] Industries Needing Dies & Molds ...... 255 [Figure 5-15] Base Industry of Dies & Molds ...... 256 [Figure 5-16] Mold Valley and Korea Mold Center ...... 259 [Figure 5-17] Outsourcing of Special Processes and Standard Parts ...... 260 [Figure 5-18] Department of Die & Mold Design at Korea Polytechnics II ...... 263 [Figure 5-19] Short-term Policy for Mold SMEs ...... 268 [Figure 5-20] Long-term Government Policy ...... 270 [Figure 5-21] GISPAM Program in Summer 2014 ...... 272 [Figure 5-21] Training and Education Program ...... 274 [Figure 5-23] Matchmaking between Domestic SMEs and KODMIC ...... 277 [Figure 5-24] Cooperation Model for Korean Mold Makers, Domestic SMEs and Technological University of Chihuahua ...... 277 [Figure 5-25] Korea Mold Technology Center in Mexico ...... 279 Contents | List of Figures

[Figure 5-26] Partnership of local mold SMEs and Korea Mold Technology Center ...... 280 [Figure 5-27] Mexico Sends Workers to Korean Mold Makers ...... 281 2014/15 KSP with Mexico

Hyun Jeong Park (Program Officer, Korea Development Institute)

The Knowledge Sharing Program (KSP) with Mexico since 2012 has been developed through a strong partnership between Korea and Mexico, and the three KSPs with Mexico (from 2012 to 2014) have sought practical and tangible results for the Mexican economy. In particular, the KSPs have tackled the policy concerns of state governments as well as federal ministries, and the topics have covered specific and industry-related issues such as metal mechanics, techno parks, training programs and the industrial-academic relationship. Korean and Mexican researchers, government officials and social leaders have worked together to find better options and apply the results to make visible change in regional and national development.

These policy consultation activities were possible thanks to the unwavering support of the Mexican Ministry of Foreign Affairs as a coordinating organization and the active participation of related states and institutions. In 2014, the Korean Ministry of Strategy and Finance (MOSF) and the Korea Development Institute (KDI) decided to put more efforts and resources toward the KSP with Mexico, reflecting the importance of the relationship between the two countries and the impressive participation of Mexican counterparts. In 2014, MOSF and KDI selected Mexico as a strategic development partnership country (SDPC) for conducting a KSP, meaning relatively long-term plans (from 2014 to 2016) and a detailed program schedule with more topics.

The purpose of the 2014/15 KSP with Mexico has been enhancing innovation capacities for sustainable development of the Mexican economy. The Mexican

2014/15 KSP with Mexico • 017 Ministry of Education and four states – Hidalgo, Colima, Chihuahua and Mexico - joined the program with the following objectives: i) designing, implementing and linking public policies to stimulate the development of science and technology in the State of Colima; ii) implementing measures to help Hidalgo’s transformation into a knowledge-based economy with the enhancement of R&D potential by promoting the City of Knowledge; iii) improving the capability of the metal mechanics cluster in the State of Chihuahua; iv) raising the capacity for industrial-academic relations for the Secretariat of Public Education of the State of Mexico; and v) suggesting the formation of a research institution for VET and lifelong education. The 2014/15 KSP team comprised five Korean researchers and five Mexican consultants, along with a senior adviser and program manager.

Research Team Topics Korean Researchers Mexican Consultants Senior Adviser to 2014/15 KSP with Mexico: Young Ju Kim/Former Korean Minister of Commerce, Industry and Energy Project Manager: Senior Adviser to 2014/15 KSP with Mexico Program Officer: Hyun Jeong Park/Research Associate of Center for International Development, KDI Mariano César Designing, implementing and linking Hak-Min Kim Gutiérrez Larios public policies to stimulate development Professor Director General of science and technology in State of Soonchunhyang Council for Economic Colima University Development José Alonso Huerta Implementing measures to help Hidalgo’s Kyong Soo Kim Cruz transformation into knowledge- Vice Chairman Director General based economy with enhancement of Korea Display Council for Science, R&D potential by promoting City of Industry Association Technology and Knowledge Innovation of Hidalgo Rodolfo Valenzuela Sujin Kim Estrada Improving capability of metal mechanics Professor Director cluster in State of Chihuahua Gyeongsang Naional Council for Economic University Development Seung Kwan Jang Martin Albarran Improving industrial-academic relation Professor President capacity for Secretariat of Public Korea Polytechnic Technological University Education of State of Mexico University of Tecamac Renata Beltran Bonilla Eunsang Cho Suggesting formation of research Advisor Research Fellow institution for VET and lifelong education Undersecretariat of KRIVET Middle Education

018 • 2014/15 Knowledge Sharing Program with Mexico For the first stage of the program, Korean researchers from September 16-25, 2014, visited Mexico City and the four states participating in the 2014/15 KSP to identify their needs and check policy concerns. For an effective and efficient demand survey and pilot study, the Korean delegation was divided into two groups to visit institutions and meet related people. Korean researchers, Mexican government officials, scholars and business leaders held several meetings to discuss the topics and reviewed Korea’s development experience together. Throughout the visit, the 2014/15 KSP team narrowed down the areas of research and focused on priorities.

The second step was a policy demand seminar in Korea that included a one- day seminar for discussing topics and research as well as capacity-building visits and workshops. The KDI invited a Mexican delegation headed by Rodolfo Valenzuela (10 delegates from federal and state governments) to visit Korea November 9-16, 2014. In the policy demand seminar held on November 10 at the KDI School of Public Policy and Management, Korean researchers and the Mexican delegation discussed studies and activities carried out in the KDI’s last visit in Mexico and content and processes to be dealt with. The seminar included a session hosted by several specialists from Korean ministries, universities and public corporations to help the Mexican delegation better understand Korea’s experience in related topics. Over this period, the Mexican delegation also visited institutions such as techno parks or universities to see and experience the Korean systems of industrial policies, industrial-academic cooperation and training programs.

After the seminar, a Korean delegation visited Mexico again for a local reporting workshop and additional pilot study from January 17/19-26. Korean researchers and their Mexican counterparts wanted to discuss the application of policy consultations and conduct additional studies together. Each researcher had his or her own schedule to fully focus on a topic, and meetings were arranged reflecting researcher requests. The workshop was held on January 23 at the Mexican Ministry of Foreign Affairs in Mexico City. Mexican officials and social leaders expressed satisfaction, especially because the KSP had been offering opportunities for state governments to enhance policy capacities for regional development.

The interim reporting seminar and policy practitioners’ workshop was held in Korea, so the Mexican delegation headed by Alonso Huerta (14 from federal and state governments) made a second visit to Korea from April 12-18. In the seminar, Korean and Mexican teams reviewed their previous activities and policy consultations and checked the obstacles to applying KSP options. For capacity building, the program was especially designed to promote Korea’s policies and implementation activities for supporting SMEs, startups and industrial-academic cooperation per the Mexican side’s demands.

2014/15 KSP with Mexico • 019 The final stage of the 2014/15 KSP with Mexico was the senior policy dialogue and final reporting seminar. On May 14, 2015, the final reporting workshop was held at the Mexican Ministry of Foreign Affairs in Mexico City. Around 110 people took part including federal and state government officials, staff from international organizations, professors and students, and media. The Korean delegation headed by former Minister of Commerce, Industry and Energy Young Ju Kim shared the research results and policy recommendations, and high-level Mexican officials and consultants participated in discussions. On May 15, Kim presided over a high-level dialogue in his capacity as senior adviser to the 2014/15 KSP with Mexico to discuss how to implement policy measures mentioned in the final reporting workshop and during all KSP activities.

020 • 2014/15 Knowledge Sharing Program with Mexico Executive Summary

Taihee Lee (Korea Development Institute)

The 2014/15 Knowledge Sharing Program with Mexico was the first for Mexico as a strategic development partner country (SDPC) of the KSP. This program began with the Pre-KSP Demand Dialogue in April 2014 and ended with the Final Reporting Workshop and Senior Policy Dialogue in April 2015 under an MOU signed between Mexico’s Ministry of Foreign Affairs and Korea’s Ministry of Strategy and Finance. The program aimed at sharing experiences and ideas on innovation capacity for sustainable development of both countries, and resulted in a higher level of strategic development partnership and economic cooperation between Mexico and Korea.

The main tasks of the 2014/15 KSP with Mexico were on enhancing the policy capacity tailored to each of four Mexican states for sustainable development by offering regional innovation incentives at the state and municipal levels, and strengthening Mexico’s Ministry of Education’s capacity to devise VET-related policy. Thus, the five KSP topics for 2014 deviated much from these main tasks. The five had the key themes of i) Techno Park development in the state of Colima; ii) improvement of industrial-academic collaboration for promoting SME competitiveness in the state of Mexico; iii) Hidalgo’s transformation into a knowledge-based economy; iv) establishment of a VET-oriented policy think tank within Mexico’s Ministry of Education; and v) enhancement of Chihuahua’s capacity to form metal mechanic SME clusters.

The 2014/15 KSP with Mexico had two key issues. The first was how experts of both countries would cooperate in conducting empirical research with insufficient

Executive Summary • 021 data on development and challenging issues related to research topics faced by each country’s institution. The second was how the KSP’s output would be made feasible and relevant to Mexico’s policy environment. Nonetheless, the results were in certain respects practical and satisfactory, and this good performance could be attributable to the full support of the United Mexican States’ Ministry of Foreign Affairs and the full devotion of all researchers from both countries to the 2014/15 KSP with Mexico.

In addition, several recommendations suggested by the research team have been put into action at project sites. The Government of Colima is operating the program through four innovative groups per the team’s suggestions. Four universities in the State of Mexico have launched space programs to establish an academic-industrial center in September 2015. More recommendations are expected to follow as feasible options.

1. Designing, Implementing and Linking Public Policies to Stimulate the Development of Science and Technology for Colima State: Policy Suggestions for the Master Plan of CLQ Techno Park

The purpose of the KSP study as suggested by the State Government of Colima (GOC) is to develop the state’s Techno Park to promote science and technology innovation and business startups, which, in turn, will accelerate regional economic growth. The GOC had launched Colima Techno Park (CLQ TP) without a detailed master plan, which is essential in the early stages of development. So the study’s main task was to provide consulting on the master plan for CLQ TP.

A Korean researcher suggested that GOC devise a CLQ TP master plan linking infrastructure and operating systems to state innovation networks in a systemic and efficient way. Colima agreed to prepare a comprehensive master plan for CLQ TP to ensure successful development of the park. A group of experts from both countries held in-depth discussions on the above key issues with stakeholders ranging from policymakers to industrial managers.

The GOC is operating a learning program through four innovation working groups of industries, universities, research institutes, and governments (IURG) that builds consensus by collecting ideas and opinions, including collective agreements. Its main content contains how to create an innovative ecosystem of TP, including a conceptual framework and cluster development programs from the short-term plan on functions and space for STP to long-term plans for Technopolis and cluster in the State of Colima. The cluster development program should include programs on management, governance, physical site development and business services like incubation, support, technology commercialization and marketing.

022 • 2014/15 Knowledge Sharing Program with Mexico Suggestions for the CLQ TP master plan can be summarized as follows: i) organize a learning program of four working groups in Colima State, something GOC is doing; ii) select a project manager for CLQ Techno Park to be responsible for making the master plan and leading and coordinating all stakeholders participating in the process of CLQ TP building; iii) form six subcommittees for each of the six chapters of the master plan; and finally, iv) organize the Executive Committee of CLQ TP with leaders from the state government and legislature, universities and businesses in Colima.

2. Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico

The 2014/15 KSP study for the State of Mexico sought to upgrade and enhance the state’s SME competitiveness by promoting industrial-academic collaboration to foster sustainable regional development in Mexico State. A State of Mexico delegation visited Korea Polytechnic University (KPU) in Incheon in advance and asked the KSP to share good experiences in SME development as seen in close industrial-academic cooperation at KPU. The key focus of this KSP was institution building and setting up an operational mechanism for industrial-academic cooperation in the State of Mexico like the KPU-IAC system. .

The KPU-IAC system seeks to promote the competitiveness of small and medium businesses by supporting their production activities and new product development as well as educating technical professionals. This program consists of the Engineering House (E/H), Technology Business Incubator (TBI), Equipment Support Center (ESC) and Partner Company System. Other infrastructure like the Techno Innovation Park (TIP) and Quality of Life (QOL) Business Center were established for all actors and stakeholders in the park.

This research began by identifying and analyzing the four main functions of the KPU-IAC system as mentioned above, namely what and how KPU has done to develop SME capacity and enhance their competitiveness since its establishment. The working group consisted of representatives from four leading universities -- TESJo, TESTCo, UTTEC and UPVM – as recommended by the Secretariat of Public Education. Korean researchers and the working group worked closely together to introduce and re-design such working mechanisms so that they could work at the universities effectively. Per the results of this joint endeavor, the State of Mexico decided to establish the Center of Academy-Industry at the universities in September 2015 with the aim of nurturing engineers and supporting SME activities such as R&BD, production and testing new products.

Key follow-up actions for establishing CAI centers were also suggested. The

Executive Summary • 023 first action was drawing up a plan on establishing pilot CAI centers at universities including space and operational programs. The second action was identifying pilot products, businesses and entrepreneurs participating at the centers and securing the infrastructure mentioned above. Four universities have started space programs. And the final action was setting up operational agencies and a bilateral committee to guide the management and operation of each CAI center.

3. Measures to Foster Hidalgo’s Transformation to the Knowledge- based Economy with Enhancement of R&D Potentials by Promoting the City of Knowledge as an Integrated Ecosystem of the State’s Scientific, Technological and Innovative (STI) Capacities

The research theme of the 2014/15 KSP for the State of Hidalgo (SOH) was how the state could enhance an STI innovative ecosystem, namely “City of Knowledge,” and accelerate its transformation into a knowledge-based economy for sustainable development. SOH aimed at securing a new and sustainable source of state wealth by upgrading its innovative capacity to closely link all innovative actors like public agencies, STI institutions and companies. To achieve this goal, Hidalgo introduced and incorporated a conceptual framework of the knowledge-based economy into the City of Knowledge as the state’s initiative toward becoming a knowledge society.

Researchers from Korea and Hidalgo cooperated in analyzing the state’s socio- economic development, human resource capacity, industrial-academic cooperation, R&D spending and City of Knowledge initiative. The state government was recognized as having a strong will to implement the project and completed its City of Knowledge master plan. The problem was that Hidalgo had no relevant and sufficient investment destinations because most industries are traditional SMEs. Furthermore all actors were not linked to other within an innovative platform. The main challenge was to upgrade government capacity to coordinate all stakeholder interests and promote their participation, and more importantly, to operate the City of Knowledge initiative in Pachuca.

Key recommendations for Hidalgo’s transformation into a knowledge economy were enhance managerial capacity at various organizational levels and the innovative capacity of all actors, and then make them work together for the City of Knowledge. First, a holistic governance system for innovation at the public and private levels is needed to build consensus on all support for R&D, FDI and other innovative activities. Second, the state should implement a “selection and concentration” strategy to reset industrial targets given the changing environment and review strategic industries that it deems are urgent and have priority. Third, Hidalgo should promote communication with all actors via an IT network so that they will be kept in the City

024 • 2014/15 Knowledge Sharing Program with Mexico of Knowledge and linked together. Finally, continuous efforts are needed to upgrade human capacity and provide sufficient resources to promote innovative activities in the City of Knowledge, which is an innovation ecosystem and industrial cluster.

4. Suggestions for Establishing a Research Institution for VET and Lifelong Education

The 2014/15 KSP study for the Ministry of Education began as a follow-up to recommendations for the 2012 KSP with Mexico, and aimed at establishing a VET- related policy think tank to help the ministry to enhance its policy formulation capacity by providing relevant and timely policy data and suggestions from integrated and professional perspectives.

VET policy issues are complicated and comprehensive socioeconomic agenda are closely related to policies toward education, industry, labor, skills, welfare and other areas. In Mexico, many institutions conduct VET research without close links to the labor market and industrial demand. Even the ministry has limited research functions related to curriculum development and qualifications. Centralized research functions for all related stakeholders, including policymakers, workers and employers are non-existent. So a think tank is needed to systemically provide policy suggestions to policymakers from a holistic perspective.

One major suggestion was drafting the pilot plan for the Mexico Research Institute of Vocational and Educational Training (tentatively MRIVET). The plan should include i) an establishment scenario; ii) vision, mission and strategy; iii) major research functions (by 2020); iv) composition of personnel; v) financial resources; vi) relevant legal frameworks (laws); and vii) cooperative institutions. The next step is to set up a task force to form MRIVET. The task force should be created under the SEP composed of experts in the field. They should develop leadership through monthly meetings and additional agenda items are needed to turn the pilot plan into a master plan. Under this process, inter-ministerial meetings could be considered to elicit cooperation from ministries in charge of vocational education and training by area. Finally, the plan should be executed step by step. The system, laws and budget for the establishment of a Mexican version of Korea Research Institute for Vocational Education and Training (KRIVET) should be studied in 2015-2016, and the master plan should be submitted in 2016-2017.

5. Measures to Improve Capability of Metal Mechanics Cluster in the State of Chihuahua

The key theme of this research was to enhance the capacity of metal mechanics SMEs in Chihuahua by providing related development programs in close cooperation

Executive Summary • 025 with industrial and academic stakeholders at the regional and international levels, and effectively promoting interactions between intermediary organizations and SMEs. This study ultimately aimed at developing metal mechanics SMEs and accelerating industrial development for sustainable regional growth in Chihuahua.

Chihuahua has no solid mold and die (hereafter M&D) production bases, but does have a relatively comparative advantage in repair and maintenance. Thus, most FDI companies in Chihuahua import most mold and die injections from abroad. Mexico is the second-largest destination of global mold products due to comparatively high prices, slow delivery and low quality of Mexican products. The main challenge for this industry is if the State of Chihuahua will enhance and upgrade the output capacity of M&D SMEs and promote their competitiveness in the fierce global market.

To tackle this challenge, the first task is to form a Chihuahua Mold and Die Industry Cooperative (provisional name) for ensuring effective communication with M&D companies and stakeholders like local government and academia. Like “InterMold Korea,” the cooperative could hold an event like InterMold Chihuahua on a regular basis for promoting its M&D industry to foreign and domestic companies in Chihuahua, and even outside of the state including Mexico and Korea. Second, as mentioned above, the M&D industry in Chihuahua consists of micro or SMEs. So like Korea, policy intermediary organizations for supporting micro business or SME development should be introduced. Third, advanced M&D capacity-building programs like those on curriculum and coursework are needed to educate M&D engineers at the university level and train skilled workers at the national level. Finally, academic institutions should invite professors and professionals from more advanced economies like Korea with good academic backgrounds and extensive experience in M&D to develop knowhow and skills.

026 • 2014/15 Knowledge Sharing Program with Mexico 2014/15 Knowledge Sharing Program with Mexico: Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy Chapter 1

Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State: Policy Suggestions for CLQ TP Master Plan 1. Introduction 2. Techno Park Concept and Development Process 3. Case Study: Chungnam Techno Park Development 4. System of Major Business at Techno Park: Lessons from Chungnam Techno Park 5. Regional Innovation in Colima 6. Subjects of CLQ TP Master Plan 7. Conclusion and Future Issues ■ Chapter 01

Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State: Policy Suggestions for CLQ TP Master Plan

Hak-Min Kim (Soonchunhyang University)

Summary

The government of the Free and Sovereign State of Colima, Mexico joined the KSP (Knowledge Sharing Program) in 2014 with the research topic of “designing, implementing and linking public policies to stimulate the development of science and technology for the Secretariat for Economic Promotion of the State of Colima.” The main purpose of this KSP from Colima’s perspective is to develop its Techno Park to promote science and technology innovation and startups, which is then expected to accelerate regional economic growth.

The Colima government, along with universities in the state, have developed six business incubation centers and launched development programs for Colima Techno Park (CLQ TP). The buildings under construction at CLQ TP have no master plan, and the infrastructure and operating system are not effectively linked to the regional innovation network. So the Colima state government must begin work on the master plan for a Techno Park before it is too late. Through several workshops between Colima and Korean partners, both parties have agreed to prepare a comprehensive master plan for CLQ TP, which is essential in the early stage of development.

KSP researchers said the master plan cannot be made by a few advisory members. Experts from Colima’s industries, universities, research institutes, and governments (IURG) should complete the master plan by collecting extensive opinions from interest groups and earning approval via the agreement process. Colima is operating

028 • 2014/15 Knowledge Sharing Program with Mexico a learning program through four innovative working groups of IURG.

The main contents of the master plan should contain how to create an innovative ecological system to facilitate science and technology and promote startups as well as industry and economy. This study suggests that CLQ TP be developed under the concept of regional innovation platforms. Accordingly, this study attempts to illustrate both the most desirable model for CLQ TP and devise the master plan with regional innovators.

In the first part, this research conceptually and empirically explores the concept of a technology park based on global standards. Chungnam Techno Park of Korea is analyzed to serve as a practical model for the master plan. A major factor that led to the successful development of the Chungnam Park was the innovation group that handled the overall project for a long time, from devising the master plan to operation of the park.

Colima’s final goal in science and technology innovation is creation of a cluster, with the initial program being Science and Techno Park. CLQ TP is in the early stage of business incubation with collaboration from universities and think tanks. The master plan should consider the functions and space for business incubation, human resource development, information management, R&D, and production activities in the initial stage, and include long-term plans for Technopolis and cluster in Colima.

The major task of this study is consulting for the master plan of CLQ TP. The first topic is setting up “the development direction and concept of CLQ TP,” a task that needs implementation by not only by master plan researchers but also decision makers or legislatures of IURG. Then analyses of industrial structure and human resources in Colima should follow. The master plan must include the industrial, economic and social plans at the federal, state and municipal levels.

The business scope of CLQ TP should include programs for business incubation, company support, commercialization of technology and marketing services in that order. These programs are most effective in promoting businesses, which will supposedly be set up in the early stage of development of Techno Park. The first task is to develop business incubators in four steps: pre-incubation, main incubation, post-incubation and graduation with own production site. The second task is business support programs in six steps: startup, technological development, product development, production preparation, mass production and IPO. The third task is to induce foreign direct investment in high-tech areas including IT, mechanics and energy.

Next, a management program, governance system and plan for physical site

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 029 development must be designed. The master plan should be developed under the concept of regional innovation platform. How to harmonize external resources with internal organizations is a key issue in governance. The study implies that CLQ TP be developed in collaboration with companies, universities and governments. Researchers of the master plan should be the first group in the Colima innovation network, meeting at least once a week for mutual understanding and learning. The project manager of the master plan must lead this group with passion for the field and humility in the network. The physical site of Techno Park should be an ecological innovation hub.

Techno Park is attractive to businesses only when it has creative space, professional staff, financial resources and high quality equipment. The creative space can be designed like allowing eggs to be hatched in a soft nest. Professional staff could be recruited from a number of business areas as well as be trained by Techno Park programs. Financial resources should go to the park’s tenants through their technology assets and business plans. Equipment and facilities should be carefully prepared by surveying the demand of potential tenants.

The master plan of CLQ TP can be used as a lighthouse for a long time, like a decade or more. Thus, master plan staff has to realize that they will be evaluated on CLQ TP’s performance for a long time. They may work as advisers or executives with profound background information on Techno Park. The master plan is not supposed to collect dust on a bookshelf; rather, it must be used by staff at working sites.

The master plan can be completed within 12 months. After one month into the contract, the master plan team should present a launching report. After six months, an interim check-up seminar must be held. After 12 months, the project should be completed with a final evaluation seminar, inviting experts from Mexico and other countries. I sincerely hope that the master plan team works with great pride, considering all the benefits that a successful CLQ TP would bring.

1. Introduction 1.1. Background and Purpose of Research

1.1.1. Background

The state of Colima, Mexico, plans to promote economic growth by developing Colima Techno Park (CLQ TP), which will accelerate science and technology, and eventually commercialization. So the Colima government participated in the 2014 KSP (Knowledge Sharing Program) to learn from Korea’s industrialization experience,

030 • 2014/15 Knowledge Sharing Program with Mexico specifically in science and technology innovation and policy toward techno park development.

Colima is making every effort to strengthen industrial competitiveness by facilitating startups and promoting innovative businesses. The Colima government and universities in the state have developed six business incubation centers. At CLQ TP, three buildings are under construction, but the infrastructure and operating system are not effectively linked to the regional innovation network mainly due to no master plan. Although the regional innovation platform is not operating in Colima, innovators in industries, universities, research institutes and governments (IURG) have a strong and positive willingness to develop their region, which gives high hope for the future.

The original task of the 2014/15 KSP as requested by the Colima state government was to advise on “Designing, Implementing and Linking Public Policies to Stimulate the Development of Science and Technology for Colima State.” After comprehensive discussions, experts from both Mexico and Korea agreed to modify the task to prepare a master plan for CLQ TP, which is essential to the early stage of development.

The main elements of the master plan require creation of an innovative ecology system to facilitate science and technology and promote startups, as well as industry and economy. KSP researchers suggested that Colima experts from IURG devise the master plan by learning together with advice from KSP researchers.

The master plan cannot be made by a few advisory members. KSP researchers advised that experts from Colima complete the master plan by collecting extensive opinions from interest groups and gaining approval via the agreement process. Colima is operating a learning program for four innovative working groups of IURG.

In the second year of the Colima KSP, the four groups will run the master plan team. The project manager is chosen by a selection process by the Colima governor’s order. The main contents of the study in the first year, therefore, are theories and case studies that can be reference materials for the master plan team in the second year. The study specifically focuses on subjects that can best fit Colima based on the researcher’s own experiences in Korea as well as in other countries.

1.1.2. Purpose

This study aims to provide policy consultation for implementing the CLQ TP master plan to promote the Colima economy by commercializing science and technology in the state. Throughout the policy consulting process, the state’s key innovators from

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 031 IURG should realize the desirable model of CLQ TP themselves.

To implement the master plan by Colima innovators, they, with this consultation work, should understand the global level of the Techno Park model and learn about the development of Korean counterparts, which have shown great performances in a short time. Specifically, this consultation work will focus on the early stage of Techno Park development and its operating system, which are essential to the master plan.

Another agenda item is to introduce the regional innovation system (RIS) and provide an action plan for RIS formalization via networking of IURG. By implementing the master plan under the RIS framework, Colima innovators will naturally learn how to make CLQ TP an RIS hub.

The final goal of this research is to provide a comprehensive development plan for CLQ TP through the regional innovation platform of IURG to facilitate innovation policy, science and technology development, startups and eventually industrial growth. For this goal, the detailed experiences of initiating the master plan and running Techno Park based on the Korean model, specifically Chungnam Techno Park, will be explained.

1.2. Research Contents and Methodology

1.2.1. Contents

The main content of this study is to suggest how to establish and operate CLQ TP, which fosters startups and industrial promotion by accelerating science and technology development under an RIS framework. We expect the master plan of CLQ TP to provide a road map for sustainable growth in Colima.

This research has three issues. In the first part, the theories and realities of the global standard Techno Park are introduced. For this purpose, this paper explains the concept of and development process of Techno Park and RIS with a focus on the development of Chungnam Techno Park in Korea. This will be useful in implementing the master plan for CLQ TP.

In the second part, the innovation resources of Colima are analyzed. It is important to analyze the industrial structure and future business plan of Colima and Mexico as well. Analyses of both technological and human resources are important issues for the master plan, too.

In the last part, this paper suggests the research subjects for the master plan. Most important for the master plan group is discussion of the development concept

032 • 2014/15 Knowledge Sharing Program with Mexico and detailed programs for CLQ TP. In addition, the management system and site development plans are essential.

1.2.2. Methods

This research is basically KSP consulting work with Colima, Mexico, to develop CLQ TP based on the Korean experience. The research not only delivers Korea’s experience to Colima but also collaboration with the Colima innovation group for its demands and opinions. For this work, the Korean research team visited Colima twice to compile data and consult with Colima innovators. Colima officials also visited Korea to study the nation’s Techno Parks and learn from Techno Park professionals and government officials. Through this process, the Colima experts could participate in research activities to create a consensus with stakeholders in a variety of fields in Colima, and devise appropriate policies suitable for the state.

In the first site visit September 18-20 in Colima, the research focused on Colima policies including economic and industrial and science and technology human resources. At the same time, Korean researchers delivered lectures on the global level model of Techno Park both in advanced economies and Korea, comparing the CLQ TP plan. In this process, officials from the secretariat for economic development of Colima State and Korean researchers made a final agreement to conduct the research project for the master plan on a global level as the 2014/15 KSP project. The Korean researchers suggested setting up a self-learning organization with four working groups from IURG.

From November 10-15, 2014, Mexican experts visited Korea to learn in depth about the nation’s economic development by visiting Techno Parks, municipal governments, businesses and universities. After understanding the concept and development process of Korean Techno Parks, Colima officials fully agreed on the necessity of a master plan based on the Korean model.

Korean researchers visited Colima January 17-20, 2015, for the second time and the third learning opportunity with Colima experts. They visited Manzanillo, a major economic city like Colima City. The Korean researchers had the opportunity to analyze seaport facilities, logistics and tourism infrastructure. In addition, they spoke to businesspeople and got the latter’s opinions on CLQ TP. A meeting with business incubation managers allowed analysis of business incubation level and entrepreneurial activities.

Specific ideas for the CLQ TP master plan were discussed in a meeting with leading professors and researchers from the University of Colima. On the last day of the Korean researchers’ visit to Colima in January 2015, the Colima governor,

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 033

Activities of Korean Researchers and Mexican Experts

Participants No. Period Venue Major Works (no. of people) Colima State Gov’t Demand from CLQ TP Secretary and 12

2014. CLQ TP Site Development Analysis Research Directors and 8 1 09.18~20 Univ. of Colima R&D Capacity Analysis Deans and 10 Colima State Gov’t Industry Analysis Chamber of Commerce KDI School, Seoul Korean Techno Park Model KDI Researchers and 15 Daedeok Innopolis UNESCO-WTA Conference Conference Participants

2014. Chungbuk TP Techno Park as RIS Directors and 10 2 11.10~15 City of Cheonan Startup Promotion Directors and 8 Soonchunhyang U Business Incubation Dean and 8 Jeju Techno Park Local Specific techno Park Director and 12 Manzanillo Harbor, Harbor, Logistics, Tourism General Director and 4 Colima S Colima State Gov’t Meeting with State Gov’t Secretary and 8

2015. Univ. of Colima CLQ TP Master Plan Dean and 8 3 01.17~23 Colima State Gov’t Business Incubation Director and 16 Gov.’s Mansion Regional Innovation TP Governor and 8 Ministry of Foreign Comprehensive Conclusion General Director and 10 Affairs Lotte Hotel, Seoul General Meeting KDI Researchers and 15 University-Industry Hanyang University Directors and 8 Cooperation Seoul Youth Incubator Incubation Policy Directors and 8 2015. 4 Technology Guarantee 04.13~16 Technology Credit Policy Directors and 8 Foundation Soonchunhyang Incubator Management Directors and 8 University Incubator Institute for SMEs SME Promotion Policy Directors and 8

secretary for economic development, president of the University of Colima and other major leaders of the 2014/15 KSP held a meeting to conclude comprehensive issues raised in the process of collecting opinions of each innovation actor. The Korean researchers in this meeting proposed a sustainable legal system and policy for the master plan, to which the Colima governor fully agreed to accept. The governor also asked the secretary for economic development and University of Colima president to recommend several candidates for project manager of the master plan team. The Colima state government will select one candidate after quantitative evaluation.

034 • 2014/15 Knowledge Sharing Program with Mexico When Colima experts visited Korea April 13-18, 2015, they reported that the master plan team was almost ready. They created a self-learning program using four innovative working groups. The critical issue could be a power shift after a change of state governor, which will affect budgeting and scheduling. Thus, the draft of the master plan should be done before August 2015, when the new governor is inaugurated. The Colima experts visited several organizations for business promotion such as Credit Guarantee Foundation, University Incubation Center and Research Institute for Small and Medium-sized Enterprise. They also spent one day to learn about developing and operating Techno Parks and business incubators through Korean rules and regulations, a process that will help them devise the proper master plan.

2. Techno Park Concept and Development Process 2.1. Concept and Relativity of Research

2.1.1. Concept

To understand the concept of Techno Park, a balanced definition should include those of space and organization. Techno Park as space refers to a “knowledge- intensive industrial complex” based on industry-related cooperation through commercialized technology to promote regional economic development.

Legally, Techno Park represents the industrial technology complex in Korea. It is defined by the collection of land, buildings and facilities for IURG in serving as a hub for regional innovation and performing a wide variety of business promotions (Act on Special Cases on Support for Techno Parks). This is quite a physical concept.

Science and technology parks (STPs) are managed by professional specialists whose main aims are to increase wealth in their communities by promoting a culture of innovation and competitiveness of their associated businesses and knowledge- based institutions (International Association of Science Parks: IASP, International Board, Feb. 6, 2002). According to IASP, an STP is an organization of experts to facilitate knowledge flow for technology and management, promote business incubation and spinoffs from companies, and maintain good quality of space and facilities.

Although Techno Park emphasizes spatial aspects in the early stage of development, it would not be sustainable without expert and professional services. Such parks in Korea are operated as innovation institutions for a variety of business

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 035 promotions by a regional innovation network, which manages technological development, commercialization, financial funding, marketing, and human resource development.

2.1.2. Type of Techno Park

The terms to describe an STP vary depending on size and function. They include Science Research Park, High-Technology Park, Technology Innovation Center, High Technology Business Incubator, Technopolis, and Technology Innovation Cluster. Although these terms are grouped accordingly to function and size, they are used differently depending on a country’s industrial and economic characteristics.

In the early years, research excellence centers and business incubators were operated by separate agencies. Once the Science Park concept was introduced, these functions were operated in a single space. In addition to the production function, the Techno Park concept has been developed. Since then, the housing function has been included in Technopolis or the Technology Innovation Cluster (Figure 1-1).

[Figure 1-1] STP Types Based on Size and Function

Functional Education/ Research Business Industrial concept training interchange R&D promotion production Housing

Traditional Industrial concept University Think tank complex

Excellent Research Center Business (ERC/SRC/MRC) Incubator

Research University Town (Science City)

Science & research park, innovation center

Classification Education Intelligence R&D Technology by size and training support startup

Techno Park

Education Intelligence Technology Industrial and training support R&D startup production

Technopolis => Regional Industry Clusters

Source: Hyun, Jae-Ho, Construction Patterns of STP Complex and Policy Directions, 1996, p. 11.

036 • 2014/15 Knowledge Sharing Program with Mexico

(1) Colima’s final goal for science and technology innovation is developing a cluster. (2) The initial program for the cluster is Science and Techno Park. (3) CLQ TP is in the early stage of business incubation by collaborating with universities and think tanks. (4) CLQ TP needs a master plan to design the functions and spaces for business incubation, human resource development, information management, R&D and production in the initial stage. (5) The master plan should contain a long-term plan for Technopolis and then a cluster for Colima City.

2.1.3. Techno Park and 2014/15 KSP Colima Project

The purpose of the 2014/15 KSP (Knowledge Sharing Program) for Colima is “designing, implementing and linking public policies to stimulate the development of science and technology for the Secretariat for Economic Promotion of the State of Colima.” The detailed action for this project will be the development of science and technology by networking innovation organizations in the Colima area. And they should foster public policies that promote entrepreneurship and commercial activities in Colima by innovative enterprises.

KSP Korean researchers expect the Colima state government, University of Colima, businesses and economic organizations in the state to build a network for CLQ TP development. By doing this, they need to redefine the existing CLQ TP with a new concept to serve as a hub for regional innovation platform. The final step is to conduct research on a master plan for CLQ TP.

Korean researchers hope that regional innovation agencies of Colima State conduct research for the CLQ TP master plan. In the process of the master plan, they can learn how to organize innovation networks and promote innovative companies via CLQ TP. When Colima State, universities and business organizations (1) build a network with businesses, (2) redefine the concept of the existing CLQ TP and (3) develop a master plan for Techno Park CLQ as the regional innovation hub of the Colima area, it will perfectly match the purpose of the 2014/15 KSP.

2.2. World Techno Park Development

2.2.1. Importance of Innovative Figures in Techno Park’s Development

Globally, Silicon Valley of the U.S. is the first example of an STP. Silicon Valley began as Stanford University Research Park in the early 1950s, and a similar

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 037 development appeared as Sophia Antipolis in France, in the late 1960s and as Tsukuba Science City in Japan in the early 1970s. The first initiator was the U.S. And many types of STPs were launched in Europe and Asia by accelerating the global development of Techno Parks.

Silicon Valley was initiated by Frederick Terman, who was dean of Stanford University from 1944 to 1958. He emphasized university-industry cooperation and launched Stanford Industrial Park (later Stanford Research Park), inspiring students William Hewlett and David Packard to start Hewlett-Packard in Silicon Valley in 1939.

In 1955, Terman persuaded his friend William Shockley to move his lab to Silicon Valley from Bell Labs in New Jersey. After eight independent labs were set up from Shockley’s lab in 1957, Fairchild Semiconductor was created and inspired other spinoffs in Silicon Valley. Development of Silicon Valley would not have been possible without Terman’s vision and passion in the beginning stage.

The tech area in Sophia Antipolis, France, was initiated by Pierre Lafitte, a professor at Mines Paris Tech in the early 1960s. His article in the French daily Le Monde said science, culture and urbanization will be harmonized in one space under the new concept of knowledge city.

He created the Sophia Antipolis association along with developers including the region’s innovative people in 1969 in the quiet fishing town of Antibes near Nice. The Valbonne District Development Association was founded in 1972 and later called SYMIVAL. In a third of the development zone, innovative technology research facilities and housing areas were developed, and the rest of the region was designed for a future science and technology city in a pleasant greenbelt.

Initially, the area was not attractive to foreign companies, although Texas Instruments, IBM, Rom and Hass and many other foreign companies moved there. The University of Nice, the French National Scientific Research Center (CNRS) and National Institute for Computer Science and Control (INRIA) entered in the 1980s. In the late 1990s, companies spun off from the labs began making dynamic changes to companies and research institutions there. Since the 2010s, the park has 40,000 people working for 1,500 companies from 70 countries, the result of Laffitte’s vision and passion for Sophia Antipolis.

In Japan, Tsukuba Science City was a government-initiated program to relieve overcrowding in Tokyo in the early 1970s. The city is 60km northeast of Tokyo, and benchmarked Silicon Valley and the garden city movement of the U.K.

In the 1970s, workers at Tsukuba Research Institute and corporations commuted

038 • 2014/15 Knowledge Sharing Program with Mexico between Tokyo and Tsukuba. Thus, interaction and innovation activities were insufficient at the park. In the early 2000s, the Japanese government provided incentives to solve this problem. Afterwards, five national and public universities, 60 think tanks and more than 300 companies moved into the park.

Developed as a science and technology city to accommodate a population of 200,000, Tsukuba is not considered a success in fostering innovative businesses. The biggest problem is lack of links between think tanks and industries. To overcome this, incubator projects and information exchange programs should be carried out by the city government and innovation leaders.

As seen in Silicon Valley, Sophia Antipolis and Tsukuba Science City, a set of common factors can lead to successful innovation, namely interaction between innovators and business entities to create new types of entrepreneurial companies. This is strongly related to the vision and passion of innovators in the respective areas. That Tsukuba had no leading figures like Terman and Laffitte has implications.

Developing countries will find it difficult to discover innovator groups and produce technological innovation via Techno Parks. But an answer could be found from Terman’s advisory work for Korea’s first science park, Daedeok Research Complex, and that of Laffitte to design innovative cities in Mediterranean countries. The first job of an advisory researcher is to discover innovators in the target area and organize a learning group to build a Techno Park.

2.2.2. Global Development Trends of Techno Parks

As of 2015, IASP had 397 science and technology parks registered in 73 countries1). According to AURP (Association of University Research Parks: University Science Park Association), the world has more than 700 such parks2). On the other hand, UNESCO3) (university-industry partnerships) said more than 150 parks are in the U.S., 111 in Japan and, 110 in China, mostly after the mid-1980s.

In the early 1970s, real estate development was popular for STP development. In the 1980s and 90s, business incubation and technology innovation through support for small and medium companies emerged as the major issue for STP development. Thus, STPs are a symbol of professional service providers for regional industrial development.

In the future, STPs will be used not only for R&D and industrial activities, but also

1) iasp.ws/facts-and-figures 2) aurp.net/history 3) unesco.org/new/en/natural-sciences/science-technology/

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 039 for effective development of the inner city and urban renewal.

The purpose of a Techno Park can differ between developed and developing countries. In the former, Techno Parks utilize a technology seed to form industrial clusters. In the latter, they focus on promoting domestic industrial development developed and led by the government rather than academia or researchers.

In the early 1980s, Asia-Pacific countries like Japan and Australia led STP development, and in the 1990s, China and Korea caught up with the trend. The latest to be active in Techno Park development are countries Asia, Latin America and Africa. The main purpose of these countries in STP development is to foster economic growth within a short period by increasing per capita income and reducing unemployment. Select Middle Eastern countries with oil resources want to promote Techno Parks to prepare for the era when their natural resources run out.

Success and Failure Factors in Global Techno Park Development

(1) Success factors in the early stage - Dedicated leadership of innovators from universities and business - Interactions between researchers and business groups for new businesses - Sustainable policy for innovative infrastructure and people

(2) Failure factors - Dependence on government policy, which often causes continuity issues - Lack of innovation culture and resources - Lack of innovation networks among university, business and government

2.3. Techno Park Development in Korea

2.3.1. Origins

The first STP in Korea was Korea Institute of Science and Technology (KIST), launched in 1966 in Seoul. The typical STP, however, was established under a basic science research plan in 1973 and was moved to Daedeok Research Complex in 1978. Despite massive investment over a long period of time, Daedeok was similar to Japan’s Tsukuba Science City until the 1990s. Laboratories in the complex and industries in Daejeon had few interactions.

040 • 2014/15 Knowledge Sharing Program with Mexico Daedeok Science Town finally got the business promotion function through a university-industry association only after the 1997 Asian economic crisis. The crisis encouraged interactions between researchers and entrepreneurs in Korea.

The Daedeok complex changed its name to Daedeok Innopolis in 2005 to enhance public R&D through private enterprise. In 2011, it had 30 government agencies, eight public think tanks, 14 public institutions, 30 non-profit organizations, five universities, and 1,179 companies employing 50,000 specialists.

In the beginning of the 2000s, policies were introduced to encourage commercialization of lab technology and introduce business activities. Furthermore, regional innovators began to get aggressive. Daejeon Metropolitan City became the capital of the World Technopolis Association (WTA). Daedeok R&D Complex became a hub of the international Technopolis network with UNESCO. In addition, Daejeon was made a hub of the International Science Business Belt by the Korean government in 2011, which would eventually become the platform for Korea’s science and technology commercialization.

In 1995, Korea’s full-scale project for Techno Parks was started by the government (the Ministry of Commerce, Industry and Energy at the time) as part of a five-year technical infrastructure plan. The Act on Special Cases Concerning Support for Techno Parks (Special Law No.5578) was enacted on September 23, 1998. After 22 revisions to the related law, the purpose of a Korean Techno Park is now “to achieve regional innovation that leads regional and national competitiveness by gathering material and personal resources of companies, universities and think tanks in one space for joint technological development and collaborative commercialization.”

In 1997, 13 regional governments applied for pilot Techno Park projects. In December that year, six were chosen as pilot park operators to begin full-fledged Techno Park activities in Korea. In 1998, the Ministry of Commerce, Industry and Energy decided to allocate US$25 million over five years for six Techno Parks.

2.3.2. Performance of Korea’s Techno Parks

After a warm-up period in 1998, local governments, universities and private agencies in 1999 jointly launched the independent legal foundations of Techno Parks. When Phase 1 of the Techno Park project ended in 2007, the country had 14 Techno Parks. The central government spent US$250 million on the parks between 1997 and 2001, and US$80 million between 2008 and 2012.4)

4) Korea Institute of Science and Technology Evaluation Institute, Special Evaluation Report on Techno Park Construction, 2012, pp. 5-7

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 041 In 2003, the Strategic Industry Planning Agency was founded as an independent organization. The Regional Specialization Industry Support Center was added to the regional technological development program. In 2007, Techno Park was appointed a regional innovation hub that included the two aforementioned agencies. In the meantime, Techno Park showed qualitative growth in business promotion and greatly speed up regional industrial development. In this period, the central and local governments steadily increased spending for such parks, raising their number to 18 in Korea.

After 10 years of operation, Korea’s 18 Techno Parks in 2010 were home to 1,360 companies, or an average of 76 each. Their combined product sales reached US$17 billion, or close to US$1 billion per Techno Park. The average sale of each company was US$13.2 million. The 18 parks employed 14,999 employees, or 833 per Techno Park and 11 per business.5)

The cumulative performance of businesses supported by Korean Techno Parks cannot be measured by these statistics, which cannot include those that graduated between 2000 and 2009. Techno Parks also had positive influence on regional areas thanks to support from university business incubation centers and other ventures not located in Techno Parks.

A critical part of the parks is financial self-sufficiency. For more than 15 years, Techno Parks have received investment from both the central and local governments. They would have seen no success without government subsidies, but still stand on their own two feet.

Now, Techno Parks are looking toward the global market. Recently, Korea has sought cooperation with developing countries in Techno Park development under a business model of economic collaboration. In 2009, the Korea Techno Park Association devised a master plan for the Korean Clean Tech Cluster Project in Masdar, UAE. The Korean Technology Business Incubator was established at the Thailand Science Park in Bangkok as a bilateral collaboration in 2010. The Korea- Vietnam Incubator Park will be completed by April 2015 in Can Tho, Vietnam. With these global programs, Korean companies at Techno Parks can advance to developing countries under a global cooperation platform. This will provide mutual benefits both for Korea and its partner countries.

5) Ibid, pp. 15-17

042 • 2014/15 Knowledge Sharing Program with Mexico 3. Case Study: Chungnam Techno Park Development 3.1. Initial Ideas

It was 1995 when the idea of Chungnam Techno Park was initiated, or two years before the pilot project of the Korean Techno Park of 1997. When the central government announced a five-year technical infrastructure plan in 1995, professors in Chungcheongnam-do, or Province of Chungcheongnam-do (also referred to Chungnam by Koreans) gathered to brainstorm ideas for Techno Park development. They asked the Association of Chungnam Area University Presidents for research fund support to study the Techno Park program in the province. Funds from the association served as the project’s first seed money.

Professors created the basic idea for Techno Park development to persuade provincial officials, who eventually became a strong support group. The golden line of the governor-deputy governor-general director of the economy was closely linked with the university presidents and professor group. This was a natural regional innovation network.

Chungcheongnam-do was in a low-level position in industrialization and regional innovation capacity. It was a big challenge to compete for one of the two pilot Techno Parks. The professors and government officials prayed for the proposal papers on the application deadline.6) Believe it or not, Chungnam Techno Park was chosen as one of six selected, more than the initial goal of two. The governor, presidents and professors from the three universities who participated in the proposal held a modest celebration on Dec. 26, 1997, just one month after Korea suffered from the Asian economic crisis and had to ask for an international bailout. How ironic that hope came from the trough of despair.

Through these experiences, professors and provincial officials naturally built the spirit of regional innovation together. At the time, no venture enterprise was in the province, and RIS could not be realized. The initial group of people at Techno Park began to work together as colleagues, and contributed to opening the complex step by step.

The provincial government appointed the deputy governor as CEO of Chungnam Techno Park in January 1999. The CEO opened the business incubation and service program at the old City Hall building in Asan. The first thing he did was appoint

6) Chungnam Techno Park, 10 Years of Chungnam Techno Park History: Journey of Dream & Passion, 2010, pp. 22-23

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 043 working committee members composed of professors, government officials and businesspeople. From the provincial government, two knowledgeable officials were dispatched to the park to establish rules and regulations.

But they needed an expandable site to ensure growth. They were lucky to get a land grant of 18.5 hectares from the provincial government that was used by the Farmers Education Institute. The park began to invite startups to livestock houses and food storage areas of the old institute while preparing the master plan.

A group of master plan researchers was created by inviting 11 professors from universities and departments of public policy, business administration, engineering, mechanics, information technology and architecture. The project manager was just 40 years old, the youngest of 11 people who ranged in age from their 40s to 60s. From late fall in 1999 to the end of 2000, research for the master plan was conducted.

The first task of the master plan team was to have members understand each other; between professors in different majors, academia and the government, the government and business, and academia and industry. They worked together in going abroad to study advanced Techno Parks in Europe, the U.S., and Japan. In the intermediate report conference, they invited domestic experts to revise their works. In the final report conference, they invited foreign experts who reviewed their final works using global standards.

The project manager met the three most important people in the master plan process. The first was Hwang Hee-Yung, a former professor of computer science at Seoul National University, who was one of the initiators of the Chungnam Techno Park plan in 1995. He boldly moved to a university in the province at age 60, and is considered a pioneer in academic-industrial cooperation in Korea. When conflict arose between universities or between a university and the government, Hwang always solved the problem as the perfect coordinator. He retired at age 75 after serving as university president, but still provides valuable advice to Chungnam Techno Park.

The second most important person was Oh Deog-Sung, a professor of architecture at Chungnam National University and one of the world’s most renowned scholars in innovation complex related to urban design. He has designed many grand projects including Daedeok Techno Valley in Korea. He persuaded officials of Chungcheongnam-do to change the concept of the typical industrial park, which was the original plan. Without his support, Chungnam Techno Park would not have become a creative and spacious facility. He continues to help the park as general secretary of the World Technopolis Association (WTA) and high-ranking panelist of

044 • 2014/15 Knowledge Sharing Program with Mexico UNESCO.

The third most important person is Dr. Malcom Parry of the U.K.’s Surrey University, who is also director of Surrey Research Park. Parry allowed the master plan team for Chungnam Techno Park to visit his park in June 2000. He explained how Surrey Research Park was started and run. Then he visited the province to attend the final report conference of the master plan team in November 2000. Since then, Parry has been a valuable adviser to Chungnam Techno Park. Having worked at the Surrey Park for more than 40 years, he received the Order of the British Empire.

The Techno Park master plan was made possible thanks to these three contributors. At Techno Park, people hold the most important value and the network can shine bright as it gets older. Particularly, the initial participants in Techno Park’s development period should be involved in operations since the development concept is extremely important to maintain. They should transfer a new vision and passion to newer participants. The spirit of innovation can be maintained when innovation is accumulated and sustainable.

3.2. Contents of Chungnam Techno Park Master Plan

The master plan was organized into ten chapters. The major content includes analysis of a specific industry, the role of Chungnam Techno Park in regional industrial development, business promotion policy, creation of a regional innovation network and a road map for long-term development. The master plan has been useful over the past 15 years by park staff and external advisers.

Ten Chapters of Chungnam Techno Park

1. Theoretical Background 2. Change in Industrial Structure of Chungcheongnam-do 3. Regional Specific Industry and Provincial Issues 4. Role in Regional Industry S 5. Core Business 6. Infrastructure Business 7. Regional Technology Innovation Strategy 8. Sustainable Model 9. Development Plan for Cheonan Valley (HQ) Site 10. Long-term Development Plan

Source: Chungnam Techno Park, Master Plan of Chungnam Techno Park, 2000.

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 045 3.3. Chungnam Techno Park Model

Chungnam Techno Park is the first model of the network-based Techno Park in Korea. Businesses are supported by Techno Park along with the central, provincial and municipal governments and innovation organizations including universities and think tanks as seen in [Figure 1-2].7)

[Figure 1-2] Innovation Platform by Techno Park

Regional Innovation System by Techno Park

Government Budget & Policy Support for R&D/HRD • Budget Supply Business Promotion Policy Supports • Policy Supports Policy Implementation • Cooperation between Creation of Wealth & Tax Industry and University • Development of Regional Industries

Development Budget Support of Regional Industries

Universities Research Institutions Supply of TECHNO PARK Business Enterprises Technology Promotion • R&BD & Manpower • Platform of Regional Programs • R&D Commercialization • Supply of High Innovation System • Manufacturing Technology Labors Program • Linkage of Government, Program • Global Marketing • Creation & Innovation of Supports Industries & Universities Performance • Job Creation New Technologies for Technology & Business • Income Creation

Joint R&D and HR Supply

Cost Sharing & Recruitment

The regional innovation network has been formed by 17 major universities in the province. The professional experts of this network participate in Techno Park programs from the beginning of development. Of 17 universities that provided the human capital pool, 11 invested their own financial resources for the establishment of Techno Park. Although the investment amount by these universities was only US$3 million, it was valuable in that it showed their sense of responsibility for regional innovation and willingness toward regional development.

The amount of investment in the first 10 years (1998-2007) was about US$200 million. The central government gave about US$125 million and the Chungcheongnam-do Provincial Government about US$52 million. In addition,

7) Kim, Hak-min, “Innovation Capacity Analysis for Regional Innovation System,” Journal of Korea Industrial-Academic Cooperation Society, 2006

046 • 2014/15 Knowledge Sharing Program with Mexico municipal governments including those of Cheonan and Asan provided about US$9 million with their property and financial resources. Other supporters including two banks, 17 universities and entrepreneur associations gave US$14 million.

Of the US$200 million, US$84 million went to construction of the complex with 10 buildings, US$26 million for purchasing facilities and equipment, US$69 million for business support, US$12 million for operating costs and US$9 million for payroll.

Of the US$69 million for business support, US$47 million went to R&D, US$7 million to an innovation network program, US$8 million to business incubation, US$4 million to an IT display industry center, and US$3 million to a multimedia industry center. Over this period, Chungnam Techno Park itself earned US$16 million from space and equipment rental that was kept in reserve.

Budget of Chungnam Techno Park (1998-2007) Amount: Million Amount: Million Investment source Expenditure item US$ (%) US$ (%) Central Gov’t 125 (62.5%) Construction 84 (42.0%) Provincial Gov’t 52 (26.0%) Facilities and equipment 26 (13.0%) S Municipal Gov’t 9 (4.5%) Business support 69 (34.5%) Banks 3 (1.5%) Operating cost 12 (6.0%) Universities 3 (1.5%) Payroll 9 (4.5%) Others 8 (4.0%) Total 200 (100%) Total 200 (100%)

Source: Chungnam Techno Park, 2009, pp. 38-39 revised.

Thanks to this financial support, Chungnam Techno Park developed into a creative habitat for new businesses on farmland covering 18.5 hectares in the provincial city of Cheonan. The project manager of the master plan named it “Cheonan Valley,” which was carefully designed to provide space for business incubation, facility and equipment services, professional business services, post-business incubation and comfortable amenities. Cheonan Valley also prepared a reserved space to invite specialized industry R&D centers both domestic and foreign.

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 047 [Figure 1-3] Bird’s Eye View of Cheonan Valley, Chungnam Techno Park

Source: Chungnam Techno Park website (www.ctp.or.kr).

Chungnam Techno Park set up a road map for long-term development from the beginning of the project, through which staff could prepare for what to do in the next step. Park staff could propose special projects that the central government needed for its own demands. Chungnam Techno Park, as an industrial policy coordinator, provided information on the industrial plan to provincial governments for their municipal industrialization.

In the first stage of the park’s development in 1998-2007, the vision was “creation of regional innovation infrastructure.” The main projects to this end were the construction of Cheonan Valley and programs for business incubation and support.

The vision for the second stage was performing innovation outcome. Regional strategic industries such as cars, IT display, media contents and agro-biotechnology were developed in clusters in the province of Chungcheongnam-do. These clusters were developed in the three valleys of Cheonan, Asan and Yesan County.

048 • 2014/15 Knowledge Sharing Program with Mexico The main issue of the third stage in 2013-20 is to ensure sustainable growth of Chungnam Techno Park. Each valley should be developed as a Technopolis, an urban area with technology and residence. In each stage of the road map, Chungnam Techno Park has accelerated focus on a certain industry from manufacturing to software to systems.

[Figure 1-4] Road Map of Chungnam Techno Park

st nd rd Period 1 . Period 2 . Period 3 . Period (1999~2007) (2008~2012) (2013~2020)

Creation of Performing Sustainable Vision Innovation Intra Innovation Outcome Innovation System

Project • Cheonan Valley • 3 Local Valley & • 3 Local Valley to : BI and Post BI Cheonan Technopolis 3 Technopolis • Enterprise Support • Comprehensive • Comprehensive Eco Program Eco Promotion Sys. Development Agency • Innovation • Global Network • Core of Global Network Network System • Strategic Industries in Strategic Industries • Strategic Industry Clusters • Development of Centers World Class Cluster

Manufacturing Software Businesses System Businesses Focusing in Electric Devices, in Contents, for Future Growth Industry Automobiles, Service Bz, in Contents + Energy Bio Products Renewable Energy

Source: Hak-Min Kim (2013).

3.4. Performance and Limits

Chungnam Techno Park has overcome growing pains over the past 15 years. Its first seven years saw an ineffective business promotion program since it mainly focused on infrastructure development. In addition, startups in the early days were smaller companies that grew slowly. The park, nonetheless, has survived through trial and error with regional innovators in the early stage.

One of the most critical issues was the park’s leadership. The first CEO was deputy governor of Chungcheongnam-do who spent three years focusing on construction. He was supported by the provincial government and oversaw smooth completion of construction. After his term, the park’s next three CEOs in 2003–2007 were fired by the province for poor business performance, though startups need time to properly develop.

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 049 A professor who was project manager of the master plan was named CEO in 2007. He began restructuring the organization by stressing business incubation and commercialization. He tried to gather regional innovators from IURG again as he did in the master plan period for startup promotion programs under the regional innovation system. Sales volume and the number of employees at Chungnam Techno Park began to increase rapidly from 2007. Certain newspapers attributed this to the leadership of the new CEO, but this is incorrect because startups tend to grow rapidly seven years after inception.

[Figure 1-5] Business Growth at Chungnam Techno Park (Unit: Number of businesses)

7000

6000 Sales (0.1 Millions$)

5000

4000

3000

2000 No of Employees 1000

No. of 0 Enterprises 00 01 02 03 04 05 06 07 08 09 10 year

Source: Hak-Min Kim (2014).

The difficult task of business incubation is well shown in [Figure 1-6]. The number of startups in 2000-09 was 282, of which 33 percent failed during the incubation process. About 47 percent of companies remain at the incubation stage. Some recently moved into the park, while many are long-term tenants. So, just 20 percent of the 282 startups graduated from Chungnam Techno Park.

This is a much higher rate than that of university business incubation centers. Many startups at Chungnam Techno Park moved in after undergoing such incubation. Twenty percent that graduated still operate under the ownership from the start-up period, while 7 percent have been merged or failed, something that is unclear in the statistics. Political leaders and policymakers who want to develop Techno Parks should remember that the outcome of a business incubation program requires patience, often for an extended time.

050 • 2014/15 Knowledge Sharing Program with Mexico [Figure 1-6] Growth Pattern of Chungnam Techno Park Startups (2000~09)

Doing Successful Business Graduated 35 (13%) 56 (20%) Merged or Failed 21 (7%)

Start-ups Still Under Incubation 282 (100%) 132 (47%)

Failed during Incubation 94 (33%)

Source: Hak-Min Kim (2013).

The CEO of Chungnam Techno Park enjoyed a successful performance in 2007-10 because it was ready to grow. Although the national budget for the park shrank 25 percent over this period from the infrastructure investment years, most evaluation indexes including the financial self-reliance ratio improved rapidly.

This achievement was mainly thanks to the efforts of dedicated employees and professors who worked as special advisers to Chungnam Techno Park while on sabbatical. Particularly, they focused on business promotion programs for success of the companies. Thus, the main activities were concentrated on attracting financial investment to companies, technology commercialization, human resource development and formation of a regional innovation network. As previously mentioned in the “Techno Park Development Project: Specific Assessment Report (2012)” by the Korea Institute of Science and Technology Evaluation and Planning, most items in the above criteria have direct effects on growth of revenue and jobs of the startups.

The future tasks of Chungnam Techno Park are an expansion project of Technopolis of Cheonan Valley, presented in the third stage of the road map. In the 2000 master plan, the 18-hectare valley was expected to reach saturation after 10 years, so a 100–hectare expansion was proposed to provide an adjacent site. At that time, the proposal was rejected because it did not seem urgent.

From the present point of view, expansion of Technopolis is a must, and has been recognized as a necessary project by Cheonan municipal officials. Before it is too late, Chungcheongnam-do and Cheonan must change this area to a multifunctional district via urban planning ordinance in this area. Along with the private sector,

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 051

Key Indicators of Chungnam Techno Park in 2007-09

Categories Content Measures 2006 2009 Change Notes Budget Million US$ 81.276 61.391 -24% Budget shrank while Budget Execution of budget Million US$ 39,698 46,703 18% performance Financial self-reliance % 65% 143% 120% improved Permanent employees Person 43 56 32% More projects invited and Human resource Contract employees Person 17 50 194% productivity Productivity per capita Index 243 350 44% improved No. of tenants Company 81 132 63% Corporate Annual revenue of Tenant startups Million US$ 63.000 442.200 602% performance tenants improved Employees of tenants Person 651 1,481 127% Rental space m2 22,537 33,026 47% Rental space and Improved park Rental space ratio % 65.10% 90.28% 39% equipment activities Equipment Use Ratio % 57.73 81.23 41%

Investment to Company Million US$ 50 135.953 271,806% No. of Venture None to Increased Company 0 44 Investment Companies Registered Huge financial investment Venture Capital None to Million US$ 0 56.291 Investment Huge R&D Subsidies Million US$ 7.191 6.539 -9% Commercialization Ratio % 40% 100% 150% Budget Technology cut while commercialization Technology Transfer Cases 12 42 250% performance Commercialization by improved Cases 3 14 367% Technology Transfer

Training Hours Hours 1,188 4,451 275% More training Training Trainees Persons 287 1,830 538% programs Regional Innovation DBs Persons 837 4,294 413% Organizations in More network Network Organizations 194 290 49% Network programs People in Network Persons 1,014 2,554 152%

Source: Chungnam Techno Park, Management Report 2009, 2009.

Cheonan and the province should proceed with this business. If this land was secured as the master plan suggested 15 years ago, the purchase price would have been a tenth of current prices, and Technopolis would have been launched. This is an important message for planners who want to develop another Techno Park.

052 • 2014/15 Knowledge Sharing Program with Mexico

(1) Success factors of Chungnam Techno Park in the initial stage: - Leadership of professionals from local governments and universities - Well-designed master plan by dedicated professors and foreign experts - Regional innovation platform by governments , universities and business

(2) Errors and Mistakes of Chungnam Techno Park and Korean Techno Parks: - Impatience with business performance in the early stage - Inconsistency of Techno Park policies amid change in government - Reliance on the central government without a financial business model => Lack of capacity for self-reliant Techno Parks even after 15 years

(3) Suggestions for Two-track Approach for CLQ TP: - Long-term business incubation with Colima innovation resources- Foreign direct investment through Colima State policy for short term

4. System of Major Business at Techno Park: Lessons from Chungnam Techno Park 4.1. Business Incubation System

The bottom line of Techno Park is startups, meaning that everything there should begin with business incubation. Most successful Techno Parks pour efforts into incubation facilities. Creative talents meet at the incubation space and promote entrepreneurship with excellent research and marketing groups together.

A unique program at Chungnam Techno Park is the “Four-step Business Incubation” program, consisting of pre-incubation, main incubation, post-incubation and local settlement. The business incubation program is the first and most important in Techno Park businesses. So Chungnam Techno Park began its first official work with a business incubation program from the first day in the old City Hall building in Asan and an old livestock storage in Cheonan Valley.

In the pre-incubation stage, university students and researchers prepare their startups, and usually work at university labs. Chungnam Techno Park helps to find promising startups through a provincial startup contest. When they are selected, the park invites them to Cheonan Valley Business Incubation Center.

In the main incubation stage, most participants are active in research and business

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 053

Four Steps for Business Incubation at Chungnam Techno Park

Categories Pre-Incubation Main Incubation Post Incubation Production Site University Students R&D Activities Proto-type Actors or Mass-Production Researchers/ Business Production Functions Marketing Professors Development Commercializatiion University University Incubators Supporters Technology Parks Industrial Park Research Institutions Technology Parks Contest for Over 400 Compaines Over 130 Compaines Over 60 Compaines Performances Start-ups in 17 Universities w/2,000 Employees w/3,000 Employees

Source: Hak-Min Kim (2014).

development (R&BD). Chungnam Techno Park provides incubation space and an R&BD fund along with 17 universities in the province. Around 400 startups are under incubation with Chungnam Techno Park and 17 universities.

After three to five years of incubation, startups are chosen to enter the post- incubation stage. They focus on prototype production and commercialization process. Startups at university incubation centers can move to Chungnam Techno Park for post-incubation. About 130 startups with 2,000 employees are in Cheonan Valley inside Chungnam Techno Park.

The dream for companies in the post-incubation program is to graduate from Techno Park and build their own production sites. One of the final jobs of Techno Park is to accelerate the provincial economy. Graduating startups should find production sites in the Chungcheongnam-do area rather than in other provinces or countries. This is why Techno Park should be developed as an expandable site.

4.2. Business Support System and Program

4.2.1. Business Support System

Techno Park should provide both creative space and business service by excellent professionals. Financial investment and marketing are the most critical factors for business revenue growth. So Techno Park should install an agency or office for business services including financing and marketing.

Chungnam Techno Park set up a Contact Center to facilitate a contact point or channel of communication between Techno Park and startups in a first for Korea. This idea was later spread to all 18 Techno Parks in the country. The concept of the Contact Center is similar to MIT’s industrial liaison program (ILP). About 15 industrial

054 • 2014/15 Knowledge Sharing Program with Mexico liaison officers (ILO) are at the Contact Center to resolve any problem of startups. Each ILO is responsible for 10 startups, thus 150 companies who pay the annual membership fee are eligible for this program. Non-member companies can also participate in the general business service.

The Contact Center focuses on financing and marketing, the two most popular services demanded by businesses. Chungnam Techno Park operates four types of venture capital funds worth a combined US$100 million. It also supports domestic and foreign marketing through exhibitions and buyer allocation. Other business services are available through a regional innovation network including universities, think tanks and other governmental or public organizations.

[Figure 1-7] Contact Center Program at Chungnam Techno Park

CTP’s Comprehensive (One Stop) Service Program

Contact Center Venture Fund Marketing Service

Universities/ Research Inst < Fund Closed > < Venture Plaza > Business Service Agency • CTP Venture Fund 1-2 • Investment Fair TIC, RIC, Strategic Centers < Fund in Operation > • Products Exhibition • Connecting Buyers • CTP Venture Fund 3, 12M$ • CN~CG Mutual Fund 1 < Foreign Marketing > Contact Center 27M$ • USA Marketing Team < Fund in Formation > • EU Marketing Team • Japan Marketing Team Enterprises • CN~GG Mutual Fund 2, 27M$ • China Marketing Team

One Contact Point for Financial Assistance to Domestic & Foreign All Services Venture Firms Marketing Services

Source: Hak-Min Kim (2007).

4.2.2. Business Support Program

In general, the quality of business service by Techno Park staff can vary. If no standardized service manual exists, Techno Park cannot guarantee a high quality of business support. Although many staff there has MBAs or certification in business consulting, the park should provide standardized consulting manuals for every employee.

Accumulation of consulting data is important because Techno Park can track the

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 055 development path of startups. Such data can forecast the next agenda or issue for consulting startups. A standardized manual will also provide information on startups to fellow staff to share service ideas.

Six stages are in the development of startup growth: startup, R&D, product development, pre-production, mass production and IPO (initial public offering). Each stage has six aspects to consult for companies: pre-diagnosis, cash flow, external environment, internal environment, business strategy and financial statement.

contains a 6X6 matrix for a complete consulting checklist from start up to IPO and from basic diagnosis to the financial statement. Techno Park staff should understand these 36 components as the standardized manual of business support.

Checklist for Startup Support Services

Diagnosos Elements

st rd 4th Internal 5th Business 6th Financial 1 Preliminary 2nd Cashflow 3 External Diagnosis Environment Environment Strategy Stratement

Starting Possibility of Initial Initial Future Initial Funds Initial Strategy Company Business Success Environment Capability Profit Structure

Technical Technical Technical Technical Technical Developing Future Development Development Development Development Development Capability Profit Structure Capability Funds Environment Strategy

Product Technical Funds for Possibility for Commercializing New Business Future Development Competitiveness Commercialization New Market Capability Strategy Profit Structure

Production Availability of Funds for Condition of Mass Production Mass Production Future Preparation Mass Production Mass Production Production System Capability Strategy Profit Structure

Business Future Success Business Future Growth Core Capability Competitiveness Cashflow Factors Strategy Profit Structure

Enterprises Development Stages Initial Cashflow Analysis of IPO Progression IPO Future Public IPO Feasibility after IPO IPO Market Capability Strategy Profit Structure Opening (IPO)

Source: Hak-Min Kim (2014).

4.3. Technology Commercialization System

Techno Park seeks to find promising technologies from think tanks and transfer them to suitable companies to accelerate commercialization. The Technology Transfer Center (TTC) is an organization of Techno Park for technology transfer and commercialization. Most universities in Korea also have TTC or a technology licensing office. Thus, Techno Park should have close relations with universities to discover and

056 • 2014/15 Knowledge Sharing Program with Mexico transfer university technologies. The park should also have good information on a startup’s specialty in technology and product.

In general, the TTC is a mediator or matchmaker between university and startup. Recently, the Korean government has encouraged technology holdings companies (THCs) to be set up at Techno Parks and universities. Five steps are needed for transferring and commercializing technology by THCs. First, a THC discovers promising technology from a university or think tank, then proposes a business incubation or technology commercialization center to develop a business model with this technology. Third, the THC creates a subsidiary from this business model through an official contract with the university that provided the technology. Then the subsidiary’s revenue can be paid to shareholders or reinvested in the subsidiary. Through these procedures, the THC creates new startups and accelerates economic activity in the region.

[Figure 1-8] Technology Commercialization by Techno Park

5 Steps in Technology Commercialization

• Discovering Excellent Technologies in Universities and Research Institutions 1

• Business model Development with Commercialization Standard of TP 2

• Technology Commercialization Contract via University-Industry Cooperation 3

• Profits from Subsidiary (Start-ups) Company & Reinvestment via HRD+R&D 4

• Vitalizing Start-ups and Industry Development in the Region by TP 5

Source: Hak-Min Kim (2014).

One of the most important issues for a THC is the compensation method for inventors and other participants including Techno Park, universities and subsidiaries. [Figure 1-8] indicates four steps to transfer and create startups from the technology of the original inventor. Three steps allow profit sharing from the technology transfer.

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 057 The first step technology transfer is the technology commercialization contract between inventor and university administration office. The office could be an industrial-academic cooperation foundation or technology transfer center. At this time, the technology is legally transferred from the inventor to the university under the contract of sharing patent rights.

The university, as legal owner of the technology, can then conclude a contract with Techno Park’s THC for deciding investment share by stock issuance. At this time, the THC has the legal right of how to create a subsidiary under the contract with the university. Then it creates a subsidiary at the business incubation center of Techno Park. At this time, the THC runs the subsidiary by appointing the CEO and investing in Techno Park’s financial fund. The original inventor may participate as CTO (chief technical officer) upon invitation by the THC.

When the subsidiary earns profits from the stock market after an IPO, the THC gets its share and then pays another share of the profit to the university. Then the university pays profit back to the inventor under the contract.

[Figure 1-9] Compensation Program of Technology Holding Company

(3) Realized Profits

Inventor University Professors/ Researcher (1) Technology Commercialization Agreement Industry-Academy Cooperation Foundation (4) Participating as CTO (2) Investment & (2) Realized Stock Issuance Profits

Subsidiary (3) Investment & Stock Issuance Start-ups/ spin-offs Techno Park Technology Holdings Company

(1) Realized Profits (from Stock Market)

Source: Hak-Min Kim (2014).

058 • 2014/15 Knowledge Sharing Program with Mexico 4.4. Regional Innovation System

The regional innovation system (RIS) is a network through which staff from companies, universities, think tanks, governments and business service agencies work collaboratively in a region to improve technology, production and business services. When the various players jointly learn with each other to improve R&D, product quality, public service and culture, the region turns into an innovative area with dynamic economic development.8) In this sense, Techno Park should serve as the hub of the regional innovation system.

First, Techno Park can create a regional innovation system through its board members who include government leaders, university presidents, business association leaders and professional business service providers. Then as a hub of the regional innovation system, Techno Park can organize the platform of the business support program among universities, industry associations, government or public agencies, and regional leaders such as media groups and legal professionals.

Three major issues exist for Techno Park to manage RIS: innovation of the business incubation program, R&D and commercialization, and human resource development. These innovations should be collaboratively conducted by a network of companies, universities, think tanks, governments and business service agencies. That is why Techno Park acts as an RIS hub.

Techno Park should create a study group to provide a learning opportunity for regional innovation among regional innovative actors. The essential RIS group includes companies, universities and government organizations, as well as innovation agencies like Techno Park. Within the regional innovation network, the essential group should learn from each other to facilitate an informal innovation system, which should then provide members with trust and collaboration work among entrepreneurs, engineers and scientists.

Techno Park should facilitate indirect innovation activities such as training and programs on education, finance and employment, and the legal and tax system. It cannot supply all of these programs or systems, but can be a coordinator and system as an RIS hub.

The most desirable stage of RIS is “cultural level of innovation.“ When a region possesses a cultural level of innovation, the region’s value is high enough to challenge any new technology and business. The people of this region know of the city’s innovation policy and are willing to participate in the activities of Techno Park or any innovation agency. The region has an education-friendly environment. In

8) Kim, Hak-min, 2013, pp. 388-390

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 059 addition, a financial investment program and support services are abundant in the region. Thus, Techno Park should try to set up a cultural level of innovation in its area through a self-learning program provided by Techno Park.

Cultural Factors for Sustainable RIS

Innovation Activities Categories Direct Indirect Innovation Network Official System - Enterprise - Education / Finance System Formal - Universities & Research Institutes - Labor Market - Supporting Orgs (TTL...) - Legal & Tax System - Technology Policies - Policy System Position Innovation Patterns - Trust among Client & Suppliers Cultural Factors - Collaboration among Enterprise - Value of the Region Informal - Collaboration among Scientists - Education Supporting Environment & Enterprise - Financial Support Environment - Familiarity of Technology Policy

Source: Modified from Lundvall (2007).

To develop an area by RIS, a variety of innovation elements are needed. The completed model of RIS suggests that the first essence is the anchor business. If a region lacks this, it should try to create one over the long run or invite one from outside over the short run.

The anchor business in a specialized industry should have upstream industry as well as downstream industry. The downstream industry can come in the form of collaborative partners in the market, while the upstream industry can be through suppliers to the anchor business. The downstream-upstream industries comprise the formal network of RIS.

Many informal networks are needed for the completion of RIS. Innovation infrastructure should include physical, technical and knowledge levels. Financial incentives in both the private and public sectors are essential for RIS. Completion of RIS is possible when the governance and system are created with government support, facilitator and coordinator like Techno Park, and social capital. This is why Techno Park should play the role of hub in the complete RIS system.

060 • 2014/15 Knowledge Sharing Program with Mexico [Figure 1-10] Completion Model of RIS

Governance & System • Facilitator, • Social Capital: • Coordinator Culture

• Collaboration Enterprises • Government • Investment Incentives Support via (Finance) System Public Sector

Key Enterprises in Specialization Industry

• Physical • Investment Infrastructure via Private Sector • Supporting Enterprises

Innovation • Technology • Knowledge Infrastructure Infrastructure Infrastructure

Source: Andersson and Karlsson (2004) modified.

Future Business Scope for CLQ TP from Experience of Korean Techno Parks Suggested No. of implementation years Business scope of Korean TPs Programs of Korean TPs for CLQ TP 1~3 4~6 7~10 years years years Business incubation 4-Step business incubation S Research and business development Central gov’t support with S Human resource development University and TP collaboration C** Information system Information network and operations C Business support services Contact center: one-stop service C Equipment and facility services Specialized industrial R&D centers C Technology commercialization Technology holdings company C Financial investment fund Venture capital formation S Networking Regional innovation system S Foreign direct investment Not active C Residential area development Not active S Production sites Not active

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 061 5. Regional Innovation in Colima 5.1. Industry Analysis

The Mexican state of Colima covers 5,627km2, ranking 28th out of 32 states in terms of area. The population is 710,000, the smallest for a Mexican state as of October 2014. The three major cities in the state are Colima City, Manzanillo and Tacoman.

Colima City, the state capital, enjoys the highest quality of life in all of Mexico. The city is well developed thanks to mining, business services and agriculture. Colima City has the highest level of innovation resources in Colima State, with universities and think tanks. Manzanillo has the largest seaport in Mexico, using its advantage in the logistics sector for all of Mexico as well as the southern region of the U.S. The seaport is among the top six in South America. Beautiful resort areas are along the Pacific Ocean, and Manzanillo Polytechnic University has numerous innovation resources to grow. Tacoman, which is located in the middle of Colima State, is famous for its agriculture cultivation technology. The product quality of rhyme and many other export crops is extremely high.

In Colima State, the largest industries are mining, construction and electric power in that order. Twenty-seven percent of GDP comes from these three sectors, with electricity and gas accounting for half. Iron mining in Pena Colorado, Colima, is the largest in scale in Mexico. Yet manufacturing accounts for only 4.7 percent of the state’s GDP; the main manufactured items are beverages, metal structures, canned food, furniture, printing and construction materials, and food. The high-tech industry has yet to be developed. 9)

Major Industries of Colima State

Industry Main business Related business LNG terminal Logistics Infrastructure Pipe Line Connection Facilities Industrial park Shipyard management Vehicle management Port service Container maintenance Truck yard Crop cooling storage Packaging Agro-business Crop processing Transportation Iron ore processing Ceramic and stones Mining Non-ferrous Metal Building construction materials

Source: Ministry of Economic Development, Colima State.10)

9) Modified from www.sefome.gob.mx/psefome/index.php/detalle/contenido/MTk5MQ

062 • 2014/15 Knowledge Sharing Program with Mexico As shown in

, the major industries of Colima State are infrastructure, port services, agriculture and mining. The first industry is infrastructure, as in natural gas storage facilities with pipeline connection facilities and logistics businesses with warehouses and other operations. The second industry is port services like service businesses to manage the marina and container system and operate trucking and parking. The third industry is related to agriculture like refrigeration, processing and transportation of crops, and is well developed. The fourth industry is associated with mining, and includes production and processing of iron ore, non-ferrous metals, pottery and stone for construction materials. These four areas can be references for the new business model of the business incubator center at CLQ TP. 10) In percentage of employees by industry, the focus should go to the red color of 2.5 percent, or a regional innovation resource for the science and technology and business support area. The green color of 26.6 percent is the potential innovation group including media, finance, health care and manufacturing. The green color of 70.9 percent, however, is the group that is not sure of innovation capacity. Certain innovation resources for this group can be found if a detailed analysis is conducted.

[Figure 1-11] Proportion of Employees in Colima’s Industries

Industrial Sectors

Culture, recreation and sport service 0.30

Mining 0.90

Professional scientific and technical services 1.20

Business support service 1.30

Non-government services 1.90

Media information 2.00

Financial services and insurance 2.20

Health care & social services 2.80

Accommodation, food & beverages 3.80

Agriculture, livestock, etc. 4.80

Education Services 4.90

Generation of electricity, water and gas 5.30

Legislative & Government 5.60

Manufacturing Industries 7.20

Transportation and Warehousing 11.00

Real Estate Service 13.00

Construction 15.50

Commerce 16.20

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 Employment Portion (%)

Source: Secretariat of Economic Development, Colima, 2012.11)

10) Modified from information of the National Institute of Statistics and Geography, 2012

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 063 5.2. Regional Innovation Capacity of Colima

The quality of innovation resources in science and technology in Colima is relatively good compared to other neighboring states. The State Council for Science and Technology coordinates the Colima International Knowledge Society Institute, where innovative actors form a network pool. The secretariat for economic development of Colima coordinates the council, International Knowledge Society Institute and other innovative organizations by pursuing effective innovation policies.

Colima also has 54 undergraduate and 11 graduate programs at 18 universities, along with 14 think tanks. In the private sector, 51 innovation research companies are in the early stage of activation. The state also has six business incubation centers, one small-size industrial complex and one Techno Park in Colima. These organizations will form a core group of Colima’s regional innovation system.

Several experiences in regional innovation have been seen in Colima. The state is the leader in e-government activities in Mexico, with the state government setting up the online “kiosk service desk” to allow citizens to access any government business. In this respect, the Colima state government was selected as having the best government regulatory reforms in 2012 and 2013 by the OECD. Because of the e-government system, the transparency of public administrative services is rising in addition to administrative regulation reform and improved services for citizens. In this context, Colima was named in 2012 the best place for doing business in Mexico in a publication of the World Bank.

The Digital Agenda of Colima has promoted the accessibility of knowledge systems and computer services for all without gap or barrier. Through this program, the state government plans to develop new information and communication technologies to allow all residents to access to the Internet.

The spirit of the innovation experience is important. Colima residents should remember how they organized their e-government system. In particular, they should learn from the leaders of the project, and the topics to learn from “Digital Agenda” or “e-Government” will be innovation network and program supporters to set up the CLQ TP master plan.

The mission of the University of Colima is scientific research development and training new scientists. For these missions, the school has put in international efforts toward an open innovation system. The faculty of the R&D department is active and the R&D support system is well developed. The university is deemed the best option to conduct CLQ TP.

064 • 2014/15 Knowledge Sharing Program with Mexico The major research topics that the university is involved in are radio frequency, papaya plantation, chemical and biological technology and regional innovation for agricultural profits. These studies are sponsored by Consejo Nacional de Ciencia y Tecnologia (National Council of Science and Technology or CONACYT), a competitive organization in the nation. These research topics will be valuable when the master plan of CLQ TP searches for industrial innovation areas.

In addition to the industrial aspect, the university is performing public projects and developing innovation capacity. Mexico Project Online, conducted by the University of Colima and sponsored by the Mexican government, seeks to provide equal opportunity to information services for the people. The school has helped install Internet service at schools, hospitals, libraries and public organizations in Colima. Then the university will increase its capacity in human resource development and research in related areas.

The university operates several regular forums like one on social entrepreneurship, which tries to tackle social issues and educate youth through an entrepreneurial approach. The school is also closely working with the central and state governments, and has official relations with the U.S., Europe and Asia with an open innovation attitude. Ten Korean universities have had MOUs with the University of Colima: Ewha Womans University, Pyeongtaek University, Dankook University, Korea University, Busan University of Foreign Studies, Pai Chai University, Catholic University of Daegu, Keimyung University, Cheongju University, and Hankuk University of Foreign Studies.

[Figure 1-12] University of Colima Students by Major (2011) (Unit: number of students)

4784 5000

4500

4000

3500

3000

Undergraduate 2500 graduate

2000

1306 1500

1000 356 269 119 500 179 1 35

0 Agricultural Natural Health Engineering & Sciences Sciences Sciences Technology

Source: Secretariat of Economic Development, Colima State (2014).

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 065 The University of Colima has six campuses in Colima City, Manzanillo, and Tacoman with 12,367 students enrolled in 2011. Among them, 6,715 (57 percent) were studying science and technology majors, an encouraging sign for CLQ TP development. But there are only 334 graduate students, which is rather discouraging and should be raised to conduct higher quality of research. The university has 427 professors but their specialties remain unknown, something the master plan for CLQ TP should figure out.

5.3. Status and Issues of CLQ TP

CLQ TP (El Technoparque CLQ) is located in the southwest part of Colima City, which is 1.5km away from Juarez Hill Village (Loma de Juarez -Lo de Villa) near the Manzanillo-Guadalajara Highway. CLQ TP covers 42 hectares, and is where the Electromagnetic Anechoic Institute and Agra-bio Technology Research Institute are under construction. These two think tanks are sponsored by CONACYT (National Council of Science and Technology) and operated by the university.

The landmark building is also under construction. Technology Complex looks the triple helix, and has been described conceptually as industrial-academic-government cooperation. Thus, the CLQ TP concept is advocating the innovation network system. The Triple Helix Building will house a business incubation center, headquarters and other amenities.

[Figure 1-13] Plan for CLQ TP with Triple Helix Complex

Source: www.tecnoparqueclq.com.mx/disponibilidad.php

066 • 2014/15 Knowledge Sharing Program with Mexico The Colima state government has established a public investment fund to offer industrial, commercial and business services and urban infrastructure (FIEC). The fund is supported by the secretariat for economic development, Colima State, which has been attracting investment to CLQ TP from other government organizations as well as private entities by integrating three services including science and technological development, private investment inducement and administrative support.

The CLQ TP project was launched in 2008 with CONACYT support as a national strategic project. In the first stage, basic infrastructure such as electricity, water and sewage, optical fiber cables and road pavement was completed on 23 hectares of land from 2008 to 2010. Construction of three buildings was supposed to be completed in 2014, but the Colima state government announced that 7 billion pesos (US$532 million) would be invested to complete this project by 2015.

The project’s main goals are (1) investment for infrastructure development of overall science and technology, (2) establishment of Techno Park’s exemplary management system, (3) academic-industrial cooperation for R&D and HRD, and (4) implementation of private and government co-innovation projects. These goals will be realized more faithfully under the master plan. It will be useful to understand the status and discuss the policy options for topics such as sci-tech infrastructure, human resource development and the innovation network.

The innovation infrastructure of Colima is concentrated in three institutions: the University of Colima, Colima Technology Institute and National Agro-Aqua Research Institute. The university and institute simply focus on human resource development, and thus lack sufficient activities with industries. And due to financial difficulties, whether the state government can make additional investment in industrial R&D is uncertain.

To overcome this, the CLQ TP project should first focus on profit-making projects. For example, private investment would be interested in high-tech agricultural development and IT-related logistics business with seaports. The master plan team should conduct many feasibility studies on energy and gas with information technology.

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 067

SWOT Analysis and Suggestions for CLQ TP Development Strategies Helpful to CLQ TP Harmful to CLQ TP - Gov’t leadership for innovation - Small population and area Internal - Major university: U. of Colima - Few graduate students sources - Natural resources: minerals and - Lack of high-tech industries natural gas - Lack of experience in TP development - Agricultural products and business - Expansion of seaport and logistics - FDI attraction near U.S. External - Attraction of tourists from U.S. and - Discontinuity of gov’t policy sources Canada - Financial crisis or economic slowdown - More interactions with Asia - Outbound migration to neighboring - Federal government support policy countries

(1) SO Strategies: - CLQ TP development by government-university collaboration - CLQ TP business: agriculture and natural resources with excellent logistics - New business area of CLQ TP: logistics and tourism by IT businesses - Int’l business incubators for CLQ TP in resort areas

(2) ST Strategies - Induce FDI by CLQ TP under strong government leadership - Stop outbound emigration by youths by developing excellent business incubators - Set up financial support program by CLQ TP using profit-making business model - Invite international adviser for CLQ TP to learn how to develop TP

(3) WO Strategies - Attract graduate students and researchers to CLQ TP - Develop CLQ TP in Colima City for graduate schools - Develop CLQ TP in Manzanillo for attracting Americans and Canadians - FDI and Techno Park business with Asian countries

(4) WT Strategies - Develop high technology at business incubation center of CLQ TP - Invite high-tech companies to CLQ TP

Suggestions for direction of CLQ TP development (1) TP development model by government-and university collaboration (2) Incubator development for regional as well as foreign innovators (3) Business development in agriculture, energy and mining, logistics and IT (4) Foreign direct investment in high tech including IT, mechanics and energy

068 • 2014/15 Knowledge Sharing Program with Mexico 6. Subjects of CLQ TP Master Plan

This chapter suggests the topics of the CLQ TP master plan. Most of the topics in this chapter have been covered in chapters three, four and five. The missing topics in the previous chapters are future discussion materials for the master plan team. One of the most important issues is how to harmonize the external environment into internal organization. Thus, the topics in Section 6.2 are highly recommended.

6.1. Participants of Master Plan

A. Governments 1) Federal: Ministry of Industry 2) State: Colima State Government and Congress 3) Municipal: Colima and Manzanillo

B. University Majors 1) Economics: Economic Policy, Industry Analysis 2) Business Management: Technology Management, Startup, Finance 3) Engineering: Mechanics, System Automation, Robotics 4) IT: Computer Engineering, Software, Telecommunications 5) BT: Biology, Food Science, Medicine 6) Architecture: Urban Plan, Architecture, Civil Engineering, Gardening

C. Business Services 1) Legal: Lawyers, Patent Services 2) Financial: Accountants, Banking, and Venture Capital 3) Business Promotion: Business Incubator, Chamber of Commerce

D. Industrial Sectors 1) IT: Electronics, Electric, Computer, S/W, Telecommunications 2) BT: Pharmaceuticals, Medical Instruments, Food Processing 3) Agriculture: Agro-production, Agro-machinery, Fertilizer 4) Construction: Urban Design, Architecture, Civil Work, Gardening 5) Mining and Energy: Mining Process, Natural, Gas, Electric Power 6) Others: Logistics, Tourism, Vocational Education

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 069 6.2. Contents of CLQ TP Master Plan

A. Direction and Concept of CLQ TP 1) Demand from Industry 2) Demand from Gov’t 3) Demand from University 4) Type of CLQ TP: - Physical Type: Science Park, Research Park, Techno Park, Technopolis - Actor Type: Gov’t-led, Univ.-led, Business-led 5) Brand Image of CLQ TP - Vision – Mission – Strategies – Projects

B. Analysis of Industrial Structure of Colima 1) Industrial Specialization Analysis 2) Industry I-O Analysis (if possible) 3) Human Resources of Colima Industries 4) Business Service Resources of Colima 5) Industrial Chain Supply of Colima

C. Benchmarking Advanced Techno Parks for CLQ TP 1) Case Studies in U.S. 2) Case Studies in Europe: U.K., Germany, France, Finland, Spain 3) Case Studies in South America: Mexico, Brazil, 4) Case Studies in Asia: Korea, Japan, China 5) Implications of Benchmarking Techno Parks

D. Analysis of Industrial Development Plan 1) Federal Plan for Colima State 2) Colima State Plan for Industrial Development 3) Industrial Plan for Colima City and Manzanillo 4) Socioeconomic Plan for Colima State Related to Techno Park

E. Regional Innovation Platform 1) Concept of Regional Innovation Platform 2) CLQ TP as Hub of Regional Innovation System (RIS) 3) Requirement of Colima Innovation Ecology 4) Techno Park Network in Mexico and Global Level

F. Business Scope of CLQ TP 1) Business Incubation at Techno Park and Colima State 2) Startup Support at Techno Park and Colima State 3) Technological Development in Colima State

070 • 2014/15 Knowledge Sharing Program with Mexico 4) Production and Marketing Promotion Programs in Colima State 5) Human Resource Development for Colima Companies 6) Linking Innovation Agencies and Organizations 7) Sustainable Operating Program for Profit

G. Business Incubation Development Strategy 1) Pre-Business Incubation 2) Main Business Incubation 3) Post-Business Incubation 4) Local Settlement for Incubation Graduates

H. R&BD Strategy 1) R&D (Research and Development) 2) R&BD (Research and Business Development) 3) C&BD (Connect and Business Development)

I. Technology Transfer and Commercialization 1) Technology Licensing Office (TLO) 2) Technology Holdings Company (THC) 3) Subsidiaries 4) M&A Strategy

J. Business Support Programs 1) 6 Stages of Business Growth 2) Contact Point / Business Program with Professionals 3) Startup Network Learning Programs 4) Advanced Management Programs for CEOs

K. Sustainable Development Policy 1) Incubation Graduate Policy 2) Local Settlement Program 3) Extension Site Plan 4) Financial Sufficiency Plan 5) Desirable Impacts of CLQ TP on Colima State

L. Governance Operation Plan 1) Governance System (Rules of Ownership and Operation) 2) Investment Plan and Shareholders: Gov’ts (Federal, State, Municipal) University, Enterprise 3) Authority or Business Rights of CLQ TP 4) Financial Profit Return Plan

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 071 M. Management Plan 1) CEO Quality and Obligations 2) Board of Trustees, Steering Committee, Subcommittees 3) Organization Management Plan 4) Staff Development Plan 5) Detailed Operating Rules and Regulations: HRD, Budgeting and Evaluation

N. Physical Site Plan 1) Urban Development and Zoning for Techno Park 2) Allocation of Function in CLQ TP 3) Blueprint for Construction and Gardening 4) Facility and Equipment Program 5) Related Rules and Regulations Reviewed

6.3. Timetable for Master Plan Development (Example)

A. Master Plan: 12 Months (2015.06-2016.05) B. Basic Site Design: 6 Months (2016.06-2016.12) C. Detailed Architecture Design: 6 Months (2016.09-2017.03) D. Construction Phase I: 18 Months (2017.01-2018.06) E. Construction Phase II: 12 months (TBA)

7. Conclusion and Future Issues 7.1. Conclusion

This study introduces the theories and practices of Techno Park development including those used in Korean TP development cases, especially the one of Chungnam Techno Park. This research thereby hopes that the master plan team of CLQ TP can take full advantage of this material when implementing their master plan. CLQ TP has been constructing three buildings without a detailed software master plan, so one that can accelerate the entire economy of Colima State through CLQ TP is sorely needed.

The most important agenda of this paper is to propose research topics to include in the CLQ TP master plan. The contents may be changed by the master plan team. But the concept of regional innovation system must be maintained because the team must collaboratively learn from each other from the beginning of master plan activities. As a result, the CLQ TP master plan itself should be the final output of Colima’s regional innovation system.

072 • 2014/15 Knowledge Sharing Program with Mexico The master plan team has to keep it in mind to use the master plan when CLQ TP goes on line. Members will participate in the operating stage as executive or advisory members, and must know that they will be responsible for their own writings in a couple of years, or even 10 years later.

Hard copies of the master plan should not be put on bookshelves. The master plan must be used by future CLQ TP staff at their offices and fields. If the book of master plan is worn away in 10 years, it should be the masterpiece. In 10 years, CLQ TP will perform as the best Techno Park in the world. I hope all the people who participate in the project to be proud of themselves by suggesting creative policies for the economic development of Colima State in their master plans.

7.2. Future Issues

The project manager’s role is critical to the master plan work. He or she must be respected by and committed to team members, and should also be an expert that fully understands Techno Park programs. When members are selected based on expertise by chapter, they have to meet every week. This way, the opportunity for mutual learning based on the regional innovation system is provided. Chapter 3 should be useful in this context.

The master plan cannot be written by a small number of experts. The innovation policies and programs will be found in the processes of discussion and agreement among those from governments, companies, universities, think tanks and business services.

When the master plan project is launched, a conference should follow on starting issues and directions of the master plan process in a month. The team should invite all possible audiences and take notes about their opinions on what they want to do with Techno Park.

Within six months, a conference on the intermediate report should be held. The team should invite domestic experts that are well-versed on Techno Park businesses. Such experts will be able to provide strategies for Techno Park programs or fulfill any missing agenda from their experiences.

After 11 months, the master plan will be deemed temporarily completed by team members. The final touches can be made by foreign and domestic experts at the conference on the final report. This event has two objectives: get reviews from global experts and publicly promote the grand opening of CLQ TP.

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 073 References

Andersson, M. and C. Karlsson, “Regional Innovation Systems in Small and Medium-sized Regions: Critical Review and Assessment,” Working Paper Series in Economics and Institutions of Innovation 10, Royal Institute of Technology, CESIS, Sweden, 2004. Association of University Research Parks, “History of AURP,” aurp.net/history. Chungnam Techno Park, Master Plan of Chungnam Techno Park, 2000. ———, Evaluation of Management by the Ministry of Knowledge Economy, 2009. ———, 10 Years of Chungnam Techno Park History: Journey of Dream and Passion, 2010. ———, “Annual Report of Chungnam Techno Park,” 2011. Gobierno del Estado Libre y Soberano de Colima, “Con el apoyo de la Cámara de Diputados, se concluirá el Tecnoparque: SEFOME,” Secretaría de Fomento Económico, last modified September 8, 2014, www.sefome.gob.mx/psefome/index.php/detalle/ noticia/NDAyOA==#sthash.BU5O4lNH.dpuf ———, “Oportunidades de Inversión,” Secretaría de Fomento Económico, last modified July 5, 2013, www.sefome.gob.mx/psefome/index.php/detalle/contenido/MTk5MQ Hyun, Jae Ho, Construction Patterns of STP Complex and Policy Directions, 1996. International Association of Science Parks and Areas of Innovation, “Facts and Figures,” last modified June 2015, iasp.ws/facts-and-figures;jsessionid=79334a0c6766c57309b511e fc127. Kim, Hak-Min, “Innovation Capacity Analysis for Regional Innovation System, “Journal of Korea Industrial-Academic Cooperation Society, 2006. ———, “Science and Technology Park as Regional Innovation Platform,” Technopolis: Best Practices for Science and Technology Cities, edited by D. S. Oh and F. Phillips, UK: Springer, 2013, pp. 387-404. ———, “Management of Regional Innovation System by Science and Technology Parks: Lessons from Korean Techno Parks in 2003-13,”presentation at the Asia Science Park Association Annual Conference, Iran, 2014. Korea Institute of Science and Technology Evaluation and Planning (KISTEP), “Techno Park Development Project: Specific Assessment Report,” 2012 Lundvall, B. A., “Innovation System Research: Where it came from and where it might go,” Globelics Working Paper No. 2007-01, 2007. Secretariat for Economic Development of Colima State, 2014 KSP Workshop Material, December 2014. ———, 2014/15 KSP Propose Material, January 2014.

074 • 2014/15 Knowledge Sharing Program with Mexico UNESCO, “University-Industry Partnerships (UNISPAR),” unesco.org/new/en/natural-sciences/ science-technology/university-industry-partnerships/. www.technopark.or.kr www.iasp.ws www.colima-estado.gob.mx

Chapter 1 _ Designing, Implementing and Linking Public Policies to Stimulate Scientific and Technological Development of Colima State:Policy Suggestions for CLQ TP Master Plan • 075

2014/15 Knowledge Sharing Program with Mexico: Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy Chapter 2

Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico

1. Overview of Mexico State 2. HRD & IAC Development to Raise Korean SME Competitiveness 3. KPU’s IAC Programs to Raise SME Competitiveness 4. Establishment of CAI Centers in Mexico State ■ Chapter 02

Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico

Seung Kwan Jang (Korea Polytechinic University) Oscar Sandoval Torres (Tecnológico de Estudios Superiores de Jocotitlán) Jorge Hernández Hernández (Tecnológico de Estudios Superiores de Coacalco) Gilberto Ochoa Ortega (Universidad Politécnica del Valle de México) Jessica Alejandra Espinosa Torres (Universidad Tecnológica de Tecámac)

Summary

Overview of Mexico State

Mexico State is located in the central part of the United Mexican States, in a region with the country’s most developed industries and highest population. The state borders other developed states such as Querétaro, Hidalgo, Michoacán, Morelos, Guerrero, Tlaxcala and the Federal District.

Mexico State is the most industrialized state in all of Mexico, contributing 6.81 percent of national GDP. The state’s exports are worth US$17.309 billion per year, equal to 5.41 percent of the country’s total.

According to the State Development Plan 2011-17, the education plan must enable state residents to take on economic, social, political and cultural challenges in a critical way within a growingly globalized society. Mexico State’s existing educational system has brought about achievements, but a new system borrowed from advanced countries is needed for promoting industry-academia cooperation.

To form an advanced education system for IAC (industry-academia cooperation center), the Mexico state government commissioned the KSP program, and this study came from the KSP program with the cooperation of Korea Polytechnic University (KPU).

078 • 2014/15 Knowledge Sharing Program with Mexico To start the KSP project, the state government selected four universities for the pilot IAC -- TESJo, TESTCo, UTTEC and UPVM -- based on their facilities and experiences incollaboration with surrounding industries.

Policies & Plans for HRD & IAC Development for Raising Korean SMEs’ Competitiveness

The Korean government has been formulating many plans and policies for supporting industrial development. Thanks to state support, Korean industrial development has grown rapidly.

According to development in each era, the Korean government prepared other plans and policies for HRD (human resources development), which laid the foundation for supporting IAC programs and fostering engineers for raising SME competitiveness.

To support the regional development of industry and academia, the Ministry of Education since 2012 has been promoting the project LINC (Leaders in Industry- University Cooperation). Much success has resulted from carrying out LINC to support the development of regional industries and universities. So the ministry plans to extend this project not just to engineering but other fields to further boost the development of regional industries and universities.

Municipal and provincial governments in Korea have also been developing and implementing IAC promotion programs in each field, and have produced good results in developing industries and universities.

KPU’s IAC Programs to Raise SME Competitiveness

The main goal of KPU’s IAC programs is to heighten the competitiveness of SMEs by supporting their production activities and new product development as well as cultivating technical professionals.

To achieve these goals, KPU has built a diversity of infrastructure such as TIP (Techno Innovation Park), QWL (Quality of Working Life) and the Business Center. Many programs for raising SME competitiveness are thanks to these infrastructure types, and the IAC models produced by these programs serve as role models for other universities at home and abroad.

To support SME business activities, KPU set up 4 components in these infrastructures. The four core components of KPU’s IAC are E/H (Engineering House), TBI (Technology Business Incubator), ESC (Equipment Support Center) and the

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 079 partner company system.

This study shows the detailed functions of the four components and the successful results of KPU’s IAC.

Setup of CAI Centers in Mexico State

To promote SME competitiveness in Mexico State, the fundamental direction is to build CAI centers at universities within industrial complexes. The goals of this project should be completed within three years. The centers have the same functions as KPU, and based on the Korean experience, should provide many facilities for promoting SME competitiveness.

In the first year, the KSP proposed building pilot CAI centers at four leading universities having many relationships with businesses in industrial complexes. To facilitate the CAI centers, these universities had prepared spaces and organization as well as equipment. For successful establishment and efficient operation of the centers, government support is needed through task that includes policy creation and budget allocation. The pilot CAI centers should be opened at four universities in September this year and later at other universities in Mexico State.

The center has two functions: fostering engineers and supporting SME activities such as R&BD, production and new product testing.

Especially, the four universities will establish CAI centers according to the three- stage space program from the KSP report.

This report includes not only the number of E/H, TBI and ESC for setting up CAI centers but also the programs for operations.

And for the efficient operation of the centers, the KSP highly recommends devising the organization for operations and forming a Mexico-Korea CAI committee for exchanging technologies and human resources between both countries.

080 • 2014/15 Knowledge Sharing Program with Mexico 1. Overview of Mexico State 1.1. Overview of Mexico

1.1.1. Location

Mexico is located north of South America, shares a northern border with the U.S. and a southern border with Guatemala and Belize.

Mexico’s Profile & Social Features

Category Information

Name United Mexican States (Estados Unidos Mexicanos)

Location North America

Capital Mexico City

Major Cities Mexico City, Monterrey, Guadalajara, Puebla

Area 1,964,375 km²

2010: 112,336,538 Population 2014 (estimated): 120,286,655

Spanish (official language), about 7% of Mexicans speak 66 regional Languages languages, mainly Nahuatl, Maya, Mixteco, Zapoteco, Tsotsil, Tseltal

and Otomi

GDP US$1.261 trillion

GDP Growth 2.1% (2015 estimate)

Economically Active 2013: 48,732,252 Population

Unemployment 4.80%

Informal Employment 59.3%

Inflation 4.08%

Currency Mexican Peso (MXN)

Exchange Rate 1 USD = 13.67 MXN (2014 average)

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 081 [Figure 2-1] Map of Mexico’s Neighbors and Major Cities

Source: State of Mexico.

1.2. Overview of Mexico State

Mexico is divided into 31 regions and a Federal District. Mexico State is the most populated state in the country and located in the central part. The state capital Toluca has a population of 15,175,862.

Overview of Mexico State

Category Information Name Mexico State (Estado de México) Capital Toluca Toluca, Tlalnepantla, Naucalpan, Nezahualcoyotl, Ecatepec, Cuautitlan Major Cities Izcalli, Tultitlan, Lerma, Atizapan de Zaragoza, Atlacomulco, Jocotitlán Ixtlahuaca (12 of 125 municipalities produce 61.6% of GDP) Area 22,351 km²

Population 15,175,862 Spanish (official language), regional languages include Mazahua, Language Otomi, Matlazinca, Tlahuica and Nahuat GDP US$85.95billion Economically Active 5.1% Population Unemployment 3.76% Informal Employment 58.5% Inflation 4.08%

082 • 2014/15 Knowledge Sharing Program with Mexico Mexico State is located in the central part of Mexico, which has the highest industrial and population impact on the country. The state borders other developed states such as Querétaro, Hidalgo, Michoacán, Morelos, Guerrero, Tlaxcala and the Federal District.

Mexico State is also near Mexico City airports and ports by the Pacific Ocean including Acapulco (distance of 350km), Zihuatanejo (420km) and Lázaro Cárdenas (608km). Ports in the Atlantic Ocean are Veracruz (458km), Altamira (525km), Tuxpan (289km) and Tampico (475km). Railways span 1,304.1km and highways 13,326km.

1.3. Industrial Overview of Mexico State

1.3.1. Economic Trends

According to the MIT Observatory of Economic Complexity, Mexico has an economic complexity index (ECI) of 0.989139, and is the country’s top exporter of silver, beer, tomatoes, tropical fruit, revolution counters, feldspar, citrus and melon peel.

The country has 12 international trade agreements with the U.S. and nations in Europe, the Middle East and Asia.

Mexico’s Economic Index

Category Unit 2012 2013 2014 2015 Economic Growth % 4 1.1 2.1 3.3 Inflation (Annual Avg.) % 3.57 3.97 4.08 4.09

Exchange rate (Per US$1, Avg.) MXN 13.16 12.76 13.30 -- Foreign Exchange Reserves US$ Mln 157,223.4 169,931.6 188,160.2 -- Foreign Loans US$ Mln 67,460.5 72,180.4 77,352.4 -- Exports US$ Mln 370,769.9 380,026.6 396,459.3 -- Imports US$ Mln 370,751.6 381,210.1 399,399.8 --

Source: Central Bank of Mexico (2014).

Mexico’s top five export items: crude petroleum (13 percent), cars (8.9 percent), computers (5.4 percent), video displays (5.4 percent), delivery trucks (5 percent)

Mexico’s top five import items: broadcast accessories (3.4 percent), computers (3.3 percent), telephones (2.8 percent), cars (2.6 percent), office machine parts (2.1 percent)

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 083 Top five export destinations of Mexico: U.S. (70 percent), Canada (5.4 percent), Spain (2.1 percent), China (2.0 percent), Colombia (1.8 percent)

Top five import origins of Mexico: U.S. (47 percent), China (17 percent), Japan (4.9 percent), Germany (4.2 percent), Korea (3.9 percent)

1.3.2. Mexico State’s Industries

Mexico State is one of the country’s most industrialized states, contributing 6.81 percent of national GDP. The state’s annual exports are worth US$17.3 billion, taking up 5.41 percent of the country’s total.

The state also has 364,921 businesses in the following sizes: 353,998 micro, 6,431 small, 2,755 medium and 1,737 large.

[Figure 2-2] Mexico State’s Main Industrial Sectors

Food Industry Manufacture of Metal 30% 21% Products Textile Industry

13% Manufacture of Plastic 5% Products Chemical Industry 6% 9% 7% 9% Furniture Manufacture Manufacture of Non- Metallic Products Others

Source: National Statistics Directory of Economic Units (DENUE), National Institute of Statistics and Geography (INEGI), 2015.

The main industrial sectors in Mexico State are food, metal products, textiles, plastics, chemicals, furniture and non-metallic products.

The state is divided into seven socioeconomic zones: Toluca, Northern, Northeast, Metropolitan, West, South and Southeast. Industries are concentrated in the northern and metropolitan zones.

Jocotitlan Technological Institute is located in the Northern Zone of Mexico State, and supports the state’s important industrialized regions such as Toluca, Ixtlahuaca,

084 • 2014/15 Knowledge Sharing Program with Mexico Jocotitlán, Atlacomulco and Jilotepec.

[Figure 2-3] Satellite View of TESJo and Industries in Sphere of Influence

Source: National Statistics Directory of Economic Units (DENUE), National Institute of Statistics and Geography (INEGI), 2015.

[Figure 2-4] Main Industrial Sectors of Mexico State’s Northern Zone

Food Industry

17% Manufacture of Metal 35% Products Manufacture of Plastic 15% Products

Chemical Industry 6% 11% 7% 9% Textile Industry

Furniture Manufacture

Others

Source: National Statistics Directory of Economic Units (DENUE), National Institute of Statistics and Geography (INEGI), 2015.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 085 [Figure 2-5] Main Industrial Sectors in Mexico State’s Metropolitan Zone

Food Industry

23% Manufacture of Metal 34% Products Chemical Industry 11% Manufacture of Plastic Products 6% 10% 7% 9% Textile Industry

Printing Services

Others

Source: National Statistics Directory of Economic Units (DENUE), National Institute of Statistics and Geography (INEGI), 2015.

[Figure 2-6] Satellite View of Metropolitan Zone Industries & Area Universities

Source: National Statistics Directory of Economic Units (DENUE), National Institute of Statistics and Geography (INEGI), 2015.

086 • 2014/15 Knowledge Sharing Program with Mexico Industrial sectors included in Mexico State’s innovation agenda: - Advanced Manufacturing - Chemistry - Plastics - Pharmaceuticals - Information Technology - Processed Foods - Logistics - Textiles - Floriculture

1.4. Overview of Education

The national education system in Mexico comprises public and private schools in all levels of education, from elementary school to university. Mexico invests 5.191 percent of GDP on education. A combined 3,161,195 students are taught by 328,932 teachers, according to the Ministry of Education, and the country’s U.N. Human Development Index is 0.636. According to the National Institute of Statistics and Geography (INEGI), the national literacy rate in 2010 was 93.1 percent while Mexico State’s was 95.6 percent.

1.4.1. Government Policy, Plans and Legal Affairs for IAC

Mexico State’s education system is the country’s biggest with almost 4.5 million students in 2010-11 from preschool to higher education. The biggest challenge for the state government is to resolve problems at every educative level.

Mexico State’s institutions of higher education set to participate in the pilot plan are decentralized public organizations with legal personalities of their own, enabling them to conclude agreements with entities national or international and public or private.

The constitutive act of each of the four universities involved in the pilot plan has objectives such as: - Perform scientific and technological research to allow the progress of knowledge, development of technological education and more effective use of natural resources and materials for the benefit of society that can raise quality of life - Create programs linking the public, private and social sectors that help consolidate social and technological development

The universities’ powers include:

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 087 - Organizing and developing exchange programs with businesses and seeking professional collaboration in education, science and research - Regulating the development of its main functions such as teaching, research and links to the public, private and social sectors - Improving linking activities through enhancing education to benefit the public, private and social sectors - Forming the internal legal framework required to enforce their faculty

Other policies support industries and institutions in developing new technologies and products.

A major form of support is found in the National Council of Science and Technology (CONACyT), whose main goal is “to consolidate a science and technology national system able to meet major demands as well as solve specific problems and needs to contribute to higher quality of life and population’s welfare.”

This council offers funding and financial support like the following:

Sectorial funds: Trust funds that dependents and entities establish in cooperation with CONACyT with the objective of devoting financial resources for R&D in the corresponding sector

Joint funds: Instruments that support for research and technological development at the municipal and state levels, using a trust fund established with money from municipal, state and federal governments through CONACyT

CONACyT’s Institutional Fund (FONIS): The main objectives of this fund are financially support activities closely related to research and technical development; offer scholarships to foster specialized human resources; back the implementation of specific research, development and innovation projects and the national and international property rights registry; link science and technology with the service and production sectors; promote the dissemination of science, technology and innovation; spur the creation, development or consolidation of research groups and centers; and provide stimulus and reconnaissance to researchers and technologists as well as perform evaluations of their activities and results.

CONACyT’s Fund for International Cooperation in Science & Technology (FONCICyT): This fund is used for activities of an international agenda that allows the creation

088 • 2014/15 Knowledge Sharing Program with Mexico and strengthening of relationships between Mexico and their main partners in science, technology and innovation.

Institutional Fund for Regional Encouragement in Scientific, Technologic and Innovative Development (FORDECyT): This program seeks to contribute to the economic and social development of the country’s regions through financing research, development and innovation proposals of high impact that solve problems and needs that limit development or lead to improvement.

Institutional Support Committee: This body backs scientific research, technological development and innovation for science, technological development and innovation projects, human resources, international cooperation and networks.

Program for Scientific and Technological Development (PRODECyT): This program supports, encourages and maximizes high impact actions and projects to improve scientific and technological capacities and abilities that strengthen the National System of Science, Technology and Innovation.

Innovation Stimulus Program This program assists businesses in research, development or innovation projects for developing new products, processes or services.

CONACyT also helps science, technology and innovation for business linkage in the knowledge chain “education-science-technology and innovation” and its connection with the product chain. In addition, it supports the generation of new products, processes and high aggregated value, generation and protection of intellectual property, and development and consolidation of scientific and technological capabilities.

The Mexico State Council for Science and Technology (COMECyT) has programs to strengthen R&D for industry and technology; it has similar programs to those of CONACyT but COMECyT’s are specifically geared for Mexico State. The Center for Technical Assistance to Innovation (CEATI), part of COMECyT, provides assistance to researchers, universities and industries to protect intellectual property. The center performs this duty through financial and knowledge resources to get “state-of-the- art” data and register new patents.

Another funding source is a number of ministries in Mexico, specially the Ministry of Education in Mexico State.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 089 Other support programs are found in the 2009 OECD study “Revisión de Políticas de Innovación en México 2009.”

1.4.2. Higher Education in Mexico State

Mexico State has almost 15 percent of the national population, making it the most populated state in the country. To provide a higher quality of education, the state needs to streamling public and private education institutions.

Data on Institutions of Higher Education in Mexico State

Mexico Mexico State Institutions of Higher Education 3,017 269

Private Institutions of Higher Education 2,058 183 Public Institutions of Higher Education 959 83 No. of Students 3,419,391 384,152 No. of Teachers 349,193 39,878

Source: Ministry of Public Education (SEP), 2014.

1.4.3. Universities Related to Industrial Complexes in Mexico State

To set up the KSP project, Mexico State selected the first four universities based on their facilities and experiences in collaboration with surrounding industries. The four have laboratories and researchers working to support business.

The universities are located in a highly and economically active area and have connections with businesses in their respective industrial areas, with the possibility of establishing close collaboration to supply technical and technological support. So CAI center project aims to bolster this collaboration.

Each achievement of the industry-academia cooperation is mentioned below.

1.4.3.1. Jocotitlán Technological Institute

Jocotitlan Technological Institute was founded in 1998 and offered just two majors, electromechanical engineering and industrial engineering, with just 79 students. The school now offers nine majors with an enrollment of 2,980 students and will soon add computer animation engineering to the mix. Twelve classes have graduated from this institute, with 2,345 students receiving diplomas.

090 • 2014/15 Knowledge Sharing Program with Mexico Jocotitlan has 95 teachers of whom 5 percent have a Ph.D., 35 percent have a master’s degree and the rest (60 percent) have a bachelor’s. Forty-two percent of teachers with a bachelor’s are studying for a master’s and 18 percent of those with a master’s are working on a doctorate. Three KSP researchers are with the National Researchers System (SNI).

In 2006, Jocotitlan was Mexico State’s first decentralized technological institute to get ISO 9001 certification, which has been renewed every three years.

The annual budget of the institute in 2015 is MXN 63,369,460 (US$4.27 million), of which 3.81 percent is used for R&D and 3.66 percent for equipment.

Jocotitlan has 42 agreements on study internships, social services, professional stays and dual education system in areas such as manufacturing, chemistry, pharmaceuticals, plastics and textiles.

This institute is working toward building a business incubator, which is expected to launch over the next six months.

Jocotitlan covers 200,000 m² on which 12 structures stand, with a restaurant and sports areas available.

[Figure 2-7] Construction Layout of Jocotitlan Technological Institute

Source: Tecnológico de Estudios Superiores de Jocotitlán, Internal document.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 091 1.4.3.2. Universidad Tecnologica de Tecamac

Tecamac Technological University (UTTEC) was founded in 1996 in Tecamac, Mexico State, and offers 11 technical majors.

Management: management and project evaluation and human resources Business development: marketing Maintenance: industrial Mechatronics: automation Nanotechnology: materials Industrial processes: manufacturing Chemistry: biotechnology

Information and communication technologies: Informatics systems, renewable energies area energy quality and saving;

Nine engineering majors: biotechnology, project management, industrial maintenance, mechatronics, nanotechnology, business and entrepreneurial management, industrial processes and operations, information and communication technologies, and renewable energies.

The university has eight laboratories among its facilities.

Enrollment in technical engineering majors in December 2014 was 3,907 and 2,029 in engineering majors for a total of 5,936.

UTTEC has 402 professors, of whom 263 have a bachelor’s, 28 a specialty degree, 104 a master’s, and seven Ph.Ds, with 12 academic bodies.

The university’s sphere of influence includes Ecatepec, Tizayuca in Hidalgo State, Federal District, Teotihuacán, Otumba, Axapuzco, Zumpango and Texcoco.

UTTEC’s annual budget is MXN 135 million (about US$9 million) and industrial services offered include:

- Courses for MS Office software users - Languages (English, French and Japanese) - Network installation and configuration - Server installation and configuration - Educational app development for tablet PCs - Website design - Process automation services

092 • 2014/15 Knowledge Sharing Program with Mexico - Automation solutions - Services for chemical sector

Technical and engineering students participate in projects in services for industry that are always led by the school's researchers.

In agreements, UTTEC has signed general and specific collaboration agreements with industries in its sphere of influence area as mentioned below: Solutek SA de CV, Biograft, Howden North America Inc., ODAPAS Tecamac, Grupo ambiental Sahra SA de CV and RISA Technologies.

UTTEC holds ISO 9001:2008 certification.

[Figure 2-8] Construction Layout of UTTEC

Source: UTTEC.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 093 Achievements: - Creation of a linking council for academia-industry sessions every two to three months to discuss a project’s applicability and academic support for business. This council includes two industrial groups serving nearby industries and provides the link to industry for project development. - Active participation in CONACyT projects obtaining economic support to develop two academia-industry projects that have run for three years - Successful professional internship program for placing students in state businesses and in various parts of the Mexican nation as well as abroad - Participation in successful social service programs such as “Committed Women” with the Mexican army - Certification center endorsed by the Work Ministry - Year-long participation in the dual education system

As for its facilities, UTTEC prepared space for its ICA program in the first year of implementation per the location map below.

1.4.3.3. Tecnológico de Estudios Superiores de Coacalco (TESCo)

TESCo offers 12 majors, mainly in engineering, as well as five graduate programs with overall enrollment of 4,443 students and 195 professors of whom 60 percent are doing graduate studies and four are part of the National Researchers System (SNI).

Its annual budget for 2015 is US$6 million, of which 5.9 percent is used for research. Sixty-one professors and 622 students participate in research projects.

TESCo got US$3.5 million from five government and private automation modernization projects in 2014.

A combined 1,637 students receive scholarships, accounting for 38 percent of enrollment. The incubation center has produced over the last four years 187 projects and obtained 14 resources for work funding, and has 63 agreements with the public and private sectors.

TESCo holds ISO 9001:2008, 14000 and 27001 certifications, with 12 laboratories mainly for manufacturing, automation, electronics and embedded systems.

From December 2013, construction of an office building was planned covering an area of 2,349m². The first stage included the construction of 780m² and completion is slated for September 2015. The building’s original purpose has undergone a change, and the structure will house the TESCo CAI Center.

094 • 2014/15 Knowledge Sharing Program with Mexico [Figure 2-9] Construction Layout of TESCo

Source: TESCo.

[Figure 2-10] Construction of CAI Center Building

Source: TESCo.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 095 Construction of 10 dormitories is ongoing, and another 10 will be built by the end of 2015.

[Figure 2-11] Construction Dormitories for IAC Program

Source: TESCo.

1.4.3.4. Universidad Politécnica del Valle de México (UPVM)

Universidad Politécnica del Valle de México was founded in 2004 to offer competence-based education like the following:

- Five majors (three with CACEI accreditation): management, informatic engineering (accredited), industrial engineering (accredited), nanotechnology engineering and mechatronic engineering (accreditation). - Four master’s programs: management, manufacturing engineering, mechatronics, and IT and communications.

Student enrollment is 4,305 and 2,000 of them are on scholarship or other financial support. The number of graduate students is 1990 and that of teachers in the mechatronics division 16, all of whom have a master’s and 10 have a Ph.D. Four teachers also belong to the National Researchers System (SNI).

096 • 2014/15 Knowledge Sharing Program with Mexico UPVM possess 11 laboratories, each devoted to a specific subject such as physics, chemistry, informatics, manufacturing, CAD/CAM, innovation, and material analysis and characterization. The university holds international accreditation like IQNET and ISO 9000:2008.

In its annual budget for 2014, UPVM devoted almost all funds to research. It has more than 12 signed agreements of collaboration with industries of high influence like molding, automotive parts and electrical machinery. Alternatively, the university offers nearby industry a variety of technological services such as optical, electron scanning and atomic force microscopy, durometers, X-ray diffractometers and electric ovens.

A new building is under construction and more than 600m² will be devoted to host a CAI center. The next figure has the construction layout of the university and the location of the CAI center.

[Figure 2-12] Construction Layout of UPVM

Source: UPVM.

1.4.4. University Program and Organization for IAC

Due to their objectives, Mexico State universities include the linkage area Vinculación, which is in charge of beginning and strengthening links with nearby

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 097 industries and businesses by identifying their size, technological needs and industrial sector, and then calling and visiting them and signing collaboration agreements.

Universities offer a series of technical and technological services industries can use to improve their business processes, as well as utilize technological equipment that each university has to solve industrial problems or needs.

Mexico State universities have incubator centers in which students and external entrepreneurs can work on their projects, from developing business plans (R&D, production, accounting, management and marketing) to producing and putting a product on the market.

The CAI center program will be introduced as part of Vinculación, and all new areas will be available to industries and entrepreneurs to provide needed physical resources and technological support, including all which nowadays are included in the Incubation Centers.

1.4.5. Dual Education System in Mexico State

To raise the competence of the Mexican education system, the country must change the way of training professors and teaching students.

Moreover, for leading students to learn values to become specialized engineers, they need to obtain knowledge and develop abilities that lead to productive and competitive development in industrial fields, and this can happen through higher quality education.

Professors should focus on molding students to maximize tangible learning benefits within the teaching-learning process. This process shall include all actors involved in it such as the government, business people, schools, professors and students, all of whom should develop their given roles to achieve higher academic quality and long-term economic and social development in the country.

The Mexican Education Ministry (SEP) is in charge of regulating national education through mandatory dispositions for the 31 federal entities and the Federal District, and ensures that education programs are systematically applied.

In August 2014, the ministry published in the official gazette of Mexico State a notice of the implementation of academic evaluation through a competence model for middle school to college, meaning students must prove competence, an adaptation of the German model to Mexico, and must prove their knowledge acquired through industry-academia learning with praxis in the productive sector.

098 • 2014/15 Knowledge Sharing Program with Mexico 2. HRD & IAC Development to Raise Korean SME Competitiveness 2.1. Development of HRD and IAC Policies

2.1.1. Korea's Industrial Development and Policy for Each Step

Korea has based its industrial development on manufacturing, and economic growth has been achieved through this form of industrial technology development.

In the early stage of industrialization, Korea was dependent on skills and technology from developed countries. From the early 1960s to the late 70s, Korea accumulated technological knowhow using technologies from abroad.

From the second half of the 1970s through the early 90s, Korea's industrial technologies grew while imitating simple techniques. From the early 1990s to the mid-2000s, Korea reached the phase of creating new technologies.

In the early 1990s, the country developed and produced a slew of globally competitive products through advanced technologies, such as the world's first 64M DRAM (1992) and CDMA (1994) ahead of more developed countries.

A critical factor behind the success of Korea’s economic development was excellent training and cultivation of human resources in technology. In particular, technicians with excellent skills, despite low wages, greatly contributed to the country’s industrial development.

To meet the requirements of industrial development, the Korean government devised the following policies:

Korea had four rounds of human resource development (HRD) policy for development of industrial technology, starting with the first five-year plan in 1962 and the ending with the fourth in 1981.

In the 1980s, the fifth and sixth five-year plans for HRD were conducted from 1982 to 1991. The seventh for economic and social development started in 1992.

In the 2000s, HRD policy aimed at balanced regional development and promotion of basic studies.

The direction of HRD policy for industrial technology in the 1960s sought to attract the nation’s abundant labor supply from rural to urban areas. The policy was

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 099

Transformation of Policies toward Human Resource Development

1960s-1970s 1980s 1990s 2000s National Basic 1982-91: 5th & 1962-81: First Four 1992: 7th Plan for Human 6th Development 5-year Personnel 5-year Resources 5-year Personnel Development Plans Development Plan Development Development Plans (2001) Conversion of Policy Foster Scientists & Foster Cutting- Regional Balance / Plentiful Labor in Direction Engineers edge Scientists Choice & Focus Cities - Develop Basic - Expand High - Build Vocational - HRD for R&D R&D Quality Scientists Major Policy High Schools - Converting Select - Strengthen - Improve & - Prepare High Schools to Innovative Vocational High Engineers Vocational High General High Capability of Schools for Schools Schools Colleges Technicians (NURI)

based on labor supply and demand planning to meet the nation’s economic growth goals. The direction of the 1980s was toward forming a social environment allowing the quantitative and qualitative expansion of scientists and training for raising the number of technical staff.

In the 1990s, Korea mainly focused on improving the imbalance in human resource supply and demand for state-of-the-art scientific and technical personnel for SMEs, and in the 2000s, the priority was regional balance and development of underdeveloped areas.

Korea’s key HRD policy toward industrial technology in the 1960s and 70s was running programs for agriculture and fisheries commerce at high schools and technical high schools. Promoted over that period were model schools, a system for and designation of special-purpose high schools, fostering technical high schools and actions to streamline high schools.

In the 1980s, HRD policy was used in R&D (the master plan for human resources in engineering), reorganization of specialized technical high schools and general technical high schools, and conversion of education at agricultural high schools into an education system for fostering land farmers.

In the 1990s, government policies focused on improvement of engineering education at universities and strengthening the roles of technical colleges, expansion of advanced science personnel, enhancement of commercial education for technical HRD, better roles for job training, initiation of BK21 projects, stronger support for

100 • 2014/15 Knowledge Sharing Program with Mexico university research and development activities (BK21, support for leading research centers), and raising the quality of technological education.

In the 2000s, Korean policy focused on the second stage of the BK21 project which promoted basic academic training, New University for Regional Innovation (NURI), Hub University for Industrial Collaboration (HUNIC), the practicality of university education, key strategies, HRD in industrial sectors and the specialization of each university.

2.1.2. Development of Korea’s IAC Policy

IAC has the advantage of not only complementing mutual competencies and sharing the risks and burdens between universities and industries, but also efficiently benefits from performances.

This cooperation model has been applied in various forms in developed countries. In the case of Korea, IAC’s satisfaction level was problematic and remained at a certain level until the 1980s.

The necessity for IAC has stood out since the late 1980s and substantial programs for IAC had been promoted, but cooperation was not entirely satisfactory. Not until the 1990s did Korea began to introduce IAC models in earnest.

The first stage saw awareness within corporations that they could no longer survive by merely imitating technologies. The Korean government also introduced a new policy for industrial development based on establishing infrastructure for technical development.

Korea’s IAC policies have changed to meet varying stages and characteristics of industrial development. Korean industrialization in the 1960s went through a labor- intensive process focused on the light industry. Capital-intensive industrialization focused on the heavy and chemical industries followed in the 1970s, and made way for technology-intensive industrialization focused on state-of-the-art industries in the 1980s. According to this timeline of industrial development, IAC policies have changed.

The initial IAC policy was mainly for the purpose of fostering scientific and technical human resources, improving worker skills and developing technical talent.

In the 1960s, IAC got little attention, but its basis was started by establishing related laws, a long-term sci-tech development master plan, the third 5-year plan for sci-tech promotion, the third HRD plan, and other initiatives.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 101 The KIST (Korea Institute of Science and Technology) Promotion Act in 1968 formed the basis of IAC, including the proliferation of new technologies, and started to promote IAC through fostering technical talent required by industries.

In the 1970s, the Technology Development Promotion Act contained information on supporting IAC. The effects of IAC on economic development grew bigger as the economy shifted from being dominated by the light industry to the heavy and chemical industries and technicians began taking the best jobs in industry.

From the 1980s, studies on IAC posed major challenges to national policies and IAC drove most technological development projects.

In the 1990s, IAC infrastructure had been set up in practical terms. Korea promoted the construction of techno parks all around the nation to promote IAC.

Since the 2000s, promotion and implementation of IAC have been active. Relevant institutions and infrastructure have come together so that participating subjects can voluntarily cooperate, and the development of technology and technical human resources that fulfill the needs of industry has been promoted.

2.2. Government Policies for Professional Human Resource Development and IAC

2.2.1. Government Support Projects for IAC

The Korean government is seeking to perform support projects for IAC by each department to strengthen the competitiveness of SMEs.

2.2.1.1. Ministry of Education

A. Leaders in Industry-University Cooperation (LINC)

The Ministry of Education since 2012 has promoted the Leaders in LINC project to support IAC between universities and businesses. LINC is performed by integrating existing IAC projects. The purpose and vision of the project are to prevent mismatched employment and cultivate Leaders in LINC, which spurs the co-development of regional universities and industries by improving the university education system through IAC.

Cooperation measures between industries and universities are needed to prevent brain drain at regional universities and prevent mismatched employment. Based on this, a new education system for IAC should be installed and regional industries

102 • 2014/15 Knowledge Sharing Program with Mexico should be developed.

In addition, the project aims to build a new education system along with studies on IAC by expanding IAC projects focused on engineering departments to all universities.

The LINC project has promoted the first stage of two years, which seeks to establish the basis of IAC's leading model and substantiate it, and the second stage of three years intends on creating the performances of IAC's leading model and proliferating it.

[Figure 2-13] LINC Project of Korean Ministry of Education

• Enhancing Employment Rate and Building Innovation of High Education System based on Industry-Academy Cooperation Program • Development of Regional Industry through Industry-Academy Cooperation Program • Expanding Industry-Academy Cooperation System to whale University

Vision: Regional Industry and University Development based on the IAC

HRD and New Technologies by LINC Program

Object: Diversity of IAC Program and Spread IAC Program into the other Universities 60% of Regional University Employment Rate, 4000 of Partner Companies

4000 of Partner Companies 60% of Employment Rate in regional University

Expand coverage Diversity and Peculiarity Sustainable Encourage of IAC Program of IAC Program of IAC Program

• Extend IAC Program to • Creation of various Leading • Set up good Environment of IAC other Fields in addition to IAC Model • Strengthen IAC Group’s Activity Engineering Side • Module and Solid IAC Support • Effective Management of • Strengthening Support to • Peculiarity of Regional IAC Program Enterprise Industry

LINC is encouraging universities to let go of traditional education methods, perform a new type of on-the-job and on-site customized training and entrepreneurship education, and thus nurturing customized talent required by industries.

The project raised the employment rate of regular target universities from 51.3 percent in 2010 to 60 percent in 2013, and that of technical colleges from 51.3

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 103 percent in 2010 to 65 percent in 2013.

In addition to LINC, the Ministry of Education is promoting policies for the Industrial Complex Campus, contracted departments, professors focused on IAC, and the commercialization of university research performances for the support of IAC.

Looking at the main achievements of the first stage of LINC, which sought to establish the basis of IAC, an increase was seen in IAC’s achievement from the previous year. In case of universities, 81 percent of study achievements could be replaced by those of IAC, up 8 percent from the previous year. In case of technical colleges, the proportion of IAC's achievements increased to 61.5 percent when evaluating faculty performances (up 11 percent from the previous year).

IAC partner companies signed a partnership agreement with universities and jointly promoted various IAC programs. Enrollment at target universities reached 40,663, up 30.6 percent from the year before, and that of technical colleges 17,241, an increase of 18.9 percent.

Operating revenue through the common use of research equipment utilized by universities for developing technologies with partner companies rose 12 percent to KRW 30.513 billion from the previous year.

Universities ran 1,484 cases of customized training courses for industrial demand based on cooperation with partner companies, up a whopping 70.2 percent from the first year. The number of students who completed Capstone Design and on-the job training increased to 70,145 and 27,618, respectively, an increase of 64.1 percent and 40.8 percent from the first year. In addition, the proportion of college students who completed on-the-job training was 72.6 percent.

As for professors focused on IACs, the number of those at universities was 3,561 and those at technical colleges 296, up 26.8 percent and 37.7 percent from the previous year, respectively. Such instructors also played an active role in supporting employment and entrepreneurial education by linking universities and industries, especially based on their work experience in industry.

104 • 2014/15 Knowledge Sharing Program with Mexico Brief Description of LINC Program

1. Goals - Improve higher education based on IAC between industry and university - Develop regional industries by reducing underemployment (reducing gap between industry and university) - Expand scope of IAC program from engineering schools to other schools

2. Vision - Development of regional industry and academia under IAC program

3. Major Contents - 1st Term : 2012–2016 • First stage: Set up IAC model and ensure substantiality • Second stage: Create results and expand IAC model

4. Progress in IAC program - Estimation in first step: Estimate basic capacities (education and research) and characteristics of IAC - Estimation in second step: Estimate business plan of IAC program and survey needs of businesses

5. Direction of IAC program - Basic direction: Improve practical education, enhance job matching and support incubation of new businesses - Specific direction: Having competitiveness of nurturing engineers and enhancing research related with the regional industrial technologies.

6. Expectation - To improve the education program and to develop the regional industry based on the IAC program.

B. Regional Innovative HRD Project

The Korean Ministry of Education is seeking to promote joint technology development projects between universities and companies in regions other than large cities. The goal is to stop the vicious cycle of the brain drain from the provinces to metropolitan areas. The crisis of SMEs is linked with the weakening of regional competitiveness in Korea.

The ministry gave financial support to 1,097 projects worth KRW 2,926 billion. The aim is to cultivate customized talent in underdeveloped regions and strengthen research capacity through joint technology development projects between universities and industries in a region. Another goal is to foster innovative human resources of universities who can bring target regions into the future and improve their technical

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 105 competencies and industrial competitiveness.

Promotional strategies of the projects include the development of labor-oriented human resources for companies such as customized human resources for regional SMEs, advanced personnel of regional universities and cultivation of technical talent related to business support that is region specific and linked to specialized development. Also needed are specialization strategies focused on community councils and HRD of companies advancing to overseas markets related to the projects, as well as international personnel exchanges and collaborative research systems.

Through these programs, the project aims to stimulate advanced research on human resources for target regions and raise the technical competitiveness of industries there.

2.2.1.2. Ministry of Trade, Industry & Energy (MOTIE)

To have IAC raise the competitiveness of Korean companies, the Ministry of Trade, Industry and Energy (MOTIE) invested KRW 40.9 billion in 2014. The HRD project promoted the training of creative talent who can fulfill the demands of new markets and lead innovation in the energy industry.

The ministry also plans to cultivate customized human resources for companies that strengthen links between regional companies and universities. To heighten the innovative competencies of SMEs in energy, the technical HRD has been fused with ICT to stimulate competitiveness among college students for creative projects.

In the second half of 2014, MOTIE decided on the human resource cultivation project for business-connected R&D. This project aims to foster student researchers selected by SMEs and employ them after graduation on a long-term basis.

The project seeks to spread the IAC system by intensifying the solidarity between businesses and universities and maximize the effectiveness of HRD and recruitment.

In 2015, MOTIE is running the Industrial Technology Innovation Project. It is conducting 65 projects including the Industrial Convergence Promotion Project, Research & Business Development (R&BD), Industrial Experts’ HRD Project, International Cooperation of Industrial Technology Project, Infrastructure Development Project of Industrial Technology, R&D Rediscovery Project and Supporting Project of Small & Medium Companies' Joint Laboratories.

The Industrial Convergence Promotion Project supports industrial convergence for

106 • 2014/15 Knowledge Sharing Program with Mexico SMEs to prepare a revolutionary growth base through convergence and development of authentication technology for new products from industrial convergence. Also, the project seeks the development and utilization of industrial convergence common information as a key base to promote the development of new products from industrial convergence by SMEs.

The Research & Business Development (R&BD) Project seeks to promote the business outcomes of R&D through the support of businesses with promising technologies for commercialization such as industrial engines derived from creative economy, excellent business models (BM) and business ideas (BI).

The Industrial Experts HRD Project aims to build a virtuous cycle system to constantly provide industries with excellent human resources. This will be done by fostering professional personnel to lead future industries and utilizing cultivated human resources efficiently.

The International Cooperation of Industrial Technology Project seeks to acquire state-of-the-art technologies, promote advances into overseas markets and strengthen industrial competitiveness by utilizing overseas technical resources. For this, the aim is to use international technical cooperation in accordance with open innovation and acceleration of global technical competitiveness.

The Infrastructure Development Project of Industrial Technology aims to support infrastructure needed for industrial technology development, and help raise industrial technical competencies by establishing a base for design and engineering development.

The Support Project of SMEs’ Joint Laboratories aims for technical development of SMEs by operating joint laboratories of think tanks and SMEs, as well as guarantee innovative competencies in commercialization.

2.2.1.3. Small & Medium Business Administration (SMBA)

The Small & Medium Business Administration (SMBA) in 2013 supported on-site customized HRD, recruitment, reinforcement of existing workers' competencies and establishment of a labor infrastructure.

The organization helps high school graduates get jobs through specialized high schools and the pre-employment program of Meister high schools and going to school later through on-site customized HRD and employment assistance. A variety of labor cost assistance projects help SMEs with recruiting holders of master’s degrees and doctorates, offer support for labor cost assistance when SMEs use

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 107 workers overseas, hire staff at SMEs and assist training in task competencies of SME employees.

The government covers all tuition for graduates of specialized high school, who get hired earlier, and promotes Meister high schools as leading models to spur employment. Development of specialized high schools help SMEs secure the needed staff, and male employees can delay the military draft until age 24, in accordance with the Military Service Law. Graduates of special and Meister high schools can get preferential treatment in transfer to industrial technical agents. Government contracts with departments (two years of financial support for up to 75 percent of tuition) offer SME employees the chance to earn associate’s, bachelor's and master's degrees. And the government also runs a special selection system for employees who graduated from special or Meister high schools (4,000 at 65 colleges in 2013).

Through these efforts, the employment rate of special high schools in 2012 increased to 38.4 percent, more than doubling the 2009 rate of 16.7 percent. In addition, the government supports labor cost assistance projects for SMEs to recruit holders of master’s degrees and doctorates.

When manufacturing or knowledge-based service companies hire professional human resources, the government foots part of the labor cost. SMEs can get similar assistance when employing holders of master’s degrees and Ph.Ds in engineering. The Techno Doctor Project helps scientists and engineers who retired from public or research institutes affiliated with large companies to find jobs with SMEs.

3. KPU’s IAC Programs to Raise SME Competitiveness 3.1. Main Goals and Direction of KPU’s IAC Programs

The main goal of IAC programs of KPU is to heighten SME competitiveness by supporting their production activities and new product development and cultivating technical professionals.

KPU has three forms of related infrastructure in TIP (Techno Innovation Park), QWL (Quality of Working Life) and the Business Center to enhance SME competitiveness, and an organization dedicated to IAC effectively supports IAC programs.

As shown in the below figure, training programs seek to develop technical experts and R&BD (research & business development) programs help companies put

108 • 2014/15 Knowledge Sharing Program with Mexico [Figure 2-14] Direction of KPU’s IAC Program

• Supporting SMEs’ Competitiveness — To Support R&BD and Product Activity — To Supply Engineers with Special Technologies

• Education Programs for Nurturing Engineer • IAC Programs for R&BD (Practical Education) (Research & Development for Business)

• LINC • R&BD Project — Ministry of Education — Ministry of Trade, Industry & Energy — Ministry of Science, ICT and Future Planning — Small and Medium Business Administration

• Organization for Operation of IAC Programs

• TIP (Techno Innovation Park) • QWL (Quality of Working Life) • Business Center — Practical Education System — 7 story Building — 13 story Building — E/H (Engineering House) — 40 of SME’s R&D Centers — Technical & Management — TBI (Technology Business — ESC (Equipment Support Center) Support Incubator) — Provide one-stop Service

out new products with this infrastructure.

TIP is an 18-story building and consists of living amenities such as E/H, guest house, a bank, restaurants and sports center.

QWL is composed of seven floors and one basement, housing around 40 SMEs' R&D centers and a common equipment support center.

The Business Center is a 13-story building for technical support under a one-stop service. The tenants are organizations that support corporate activities like Korea Industrial Complex Corp.

3.2. Infrastructure for Support of KPU’s IAC Programs

Technical Innovation Park (TIP): KPU has established this to effectively carry out IAC programs, and TIP is considered a successful model of such programs.

KPU has established an IAC network to boost SME competitiveness, and based on this, fosters the development of both human resources and new products at the same time with E/H (Engineering House), dormitories and amenities.

The E/H functions as a R&D center for SMEs, and professors and students of

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 109 universities involved in IAC cooperation. TIP provides 24-hour facilities for IAC at the E/H. This is the leading model of IAC success in Korea.

The main functions of TIP are as follows:

- Establishment and operation of future cooperation network between businesses and universities - Commercialization, technological development, and excellent human resources and equipment support for SMEs with a focus on the E/H, that is, a collaborative research space for both companies and universities - Offers professors the infrastructure for promoting and operating IAC projects, students with the chance to get the practical education to participate in them, and SMEs with the R&BD program for developing new products

QWL (Quality of Working Life) is a new IAC model promoted by the Ministry of Knowledge Economy, Gyeonggi–do and its city of Siheung, and Korea Industrial Complex Corp. The vision of QWL is to develop the IT and machinery industries of the Siwha and Banwol region by forming an innovation cluster of industry-business cooperation.

QWL aims to stimulate mutual growth of large companies and SMEs through structural improvement of regional universities through professional skill support and configuration of four representatives of the IAC network -- joint HRD, career exploration and employment, and technical innovation.

[Figure 2-15] Goal of TIP in KPU

Strengthening of SME’s Technical competitiveness Through industry-academic cooperation

TIP Education R&BD

Export University marketsIndustry

Government

Budget Policy etc.

110 • 2014/15 Knowledge Sharing Program with Mexico [Figure 2-16] Goal of QWL in KPU

• QWL is another Program for supporting SMEs’ R&D Activities

Vision • Realization of industry-university cooperation innovation cluster for IT and machinery Structural advancement based on IT & machinery indutries in Sihwa, Banwol region

• Structural improvement of regional universities for “Shared growth for large companies Purpose and SMBs-Specialized Technological Support for SMBs & major companies” • Internalization of four representative industry-university networks (Corporate Demand - Joint manpower development - Job exploration & Employment - Technological Innovation)

Industry Academy Research Government IAC Development Project • KICOX (Korea • Other University • Korea Institute of • MOTIE Industry Complex near Siheung KPU Materials Science • Siheung City Corporation) Complex Gyeoinggi • Korea Electronics • Gyeonggi-do • Partner Company Industry- Technology • Other Agency Business • Institute of the Company Group Cooperation

Life-long Learning Programs R&D-linked Enhancement of for Employees field education competence for SMEs

The partner company system is an IAC network that builds cooperative relationships between universities and businesses by taking advantage of technology exchanges such as technology and management guidance and joint research, on-site training of students, experiment and practice equipment, and university facilities.

The goal of the system is for businesses to utilize research laboratories of universities as R&D laboratories, and for universities to run on-site training for students using on-site business personnel and facilities, on-site training for faculty, joint research projects and hiring adjunct professors.

As customized training that reflects the on-site demand of industries, the partner company system helps businesses employ technical human resources with excellent on-site adaptability. About 4,000 companies are participating in the system and each university department is part of a network with partner companies in the relevant technical area.

The partner company system is laying the foundation for IAC of KPU, and has become the basis of students getting on-site training such as the Practical Education and Term Project. It also helps businesses develop new and test products using university infrastructure such as professors, students and equipment.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 111 [Figure 2-17] Concept of Partner Company System in KPU

Concept Map of Partner Company System

University • Industry-based tailored education • Research assistance

Professor Student

• 4,000 Partner Companies • Sharing of Partner high-quality Company intellect and System • Tech, Project, cutting-edge • Practical Transfer, equipment Education Support Employment • Affiliated professors, • Field Professor, Fund, Scholarship, Field Company Provision of Information practice space Industrial field

A brief description of the partner company system is as follows:

1. Goal - Provide infrastructure for improving IAC program between business and university, and for providing practical education for students and facilities for SMEs’ R&BD

2. Major functions - Cooperation for practical education • University provides practical education for students with partner companiesl • Experts from companies can participate in educational courses as professors - Cooperation for R&BD • University provides space, equipment and human resources to support R&BD for companies • Partner companies carried out R&D projects for their businesses with university

3. Process to be partner company - First step: Companies fill out request form and send it to university online - Second step: University has to assign professor to company as consultant All professors in KPU should have relationships with those companies. (A professor has relationships with at least 20 companies)

4. Results - KPU’s partner company system becomes standard IAC model for other universities

112 • 2014/15 Knowledge Sharing Program with Mexico The E/H system is Korea’s first new IAC model in which professors, students and businesses join in the same place and conduct 24 hours of training and R&D activities. The system is providing differentiated engineering courses and R&D system to strengthen the technological competitiveness of businesses and provide a training program to students to become specialized engineers.

Professors, in the industrial technology aspect, lead the technical innovation of peripheral industrial complexes through technology support for businesses' merchandising, equipment utilization support and staff assistance. Also, they help businesses to raise the competitiveness of industrial technologies by performing continuous research for future technologies as required.

Students, in the engineering education aspect, participate in effective R&D projects through the Engineering House. Businesses do the same by receiving technical assistance from professors. Graduates can maximize their engineering capabilities by simultaneously learning techniques at business sites and undergoing practical theory training.

Companies can get new products and technologies by participating in the E/H program, which is supported by professors and students.

In addition, businesses can take advantage of state-of-the-art equipment at universities from time to time, which allows universities and businesses to develop a symbiotic relationship.

[Figure 2-18] Concept of E/H in KPU

• Professor Education • Engineers with on-site training & Responsible professor, - Education center better understanding of Participating professor - EH-linked curriculum industrial surroundings (Advisor) - Participation in R&D projects • Employment at participating enterprises

Research • Student: 3rd and - Collaboration center • Function as research center of SMEs th 4 year student - Commercialization • Focus on practical technology - Product process research

Industrial-academic Cooperation • Reduce SMEs’ difficulties • Enterprise: Researcher - Collaboration center • Utilization of high-end equipment (Field professor) - Equipment support center • Resolve technological issues - Joint technology development • Securing seasoned personnel

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 113 [Figure 2-19] Status of E/H in KPU

Participation Invite External Participating # of EH SME Engineers Professors SMEs Students

60 98 Pfof. 169 376 Students 192 E

• EH Research Expense Total Amount: U$23M/y • Personal expense paid for EH undergraduate students (as scholarship): U$4.60M/y

About 60 E/Hs are at KPU with 98 professors, 160 businesses and 376 students. Many projects have been carried out in the E/H with the research funds worth US$ 24 million.

SMEs have difficulty preparing expensive equipment for their business activities or securing human resources. To overcome these problems, KPU has prepared equipment needed by SMEs with financial support from the government. The university also has functions to support research and production testing by SMEs at the equipment support center (ESC).

In other words, the goal of an ESC is to enhance SME competitiveness through research including new product development, product testing and measurement by supplying SMEs with equipment and personnel.

KPU has three ESCs that help SME activities.

[Figure 2-20] Status of ESC in KPU

Distinction Description Distinction(yr) 2010 2011 2012 Available space 2,449m2 companies 582 679 724 Available equipment 90 tyeps(1.2mil. $) cases 2402 2624 2704 Equipment personnel 17 Fees(mil. $) 0.85 0.84 1.08

Nano-Technology Innovation Center (Nano-TIC) is a government-promoted project for raising the region’s technical innovation. The center specializes in machine and auto parts, and electronic and chemical components with high demand from

114 • 2014/15 Knowledge Sharing Program with Mexico the region, and supports joint research among industry, academia and research institutes. Forty-two Nano-TICs are run nationwide to facilitate the distribution and commercialization of related technologies.

KPU has been operating a Nano-TIC designated and supported by MOTIE since 1995 for the technical innovation of machinery parts businesses around Banwol and Siwha industrial complexes.

After the operation of a Nano-TIC, the center received KRW 4.7 billion from 1999 to 2004 from the regional government, KRW 500 million from the private sector and KRW 2.4 billion from other sources, KRW 900 million (KRW 8.5 billion total).

KPU, in the second stage of the project, has been promoting a nano-technology innovation project supported by the central government to the tune of KRW 4.3 billion over five years and another KRW 4.2 billion from the private sector (KRW 5.8 billion total). The second stage’s main activities include joint research on nano- technology innovation by universities and businesses and training of professional engineers in relevant fields.

[Figure 2-21] Overview of Nano-TIC in KPU

• Sharing equipment support center expansion to support SME & integration of sharing equipment High value PCB joint research Make better use of center • Center expansion & equipment equipment integration (Profit U$1.8M achieve) IT mechanics • Build equipment management system Sharing equipment profit status & 1,033,014 (Unit: k￦) • Promotion of effective sharing 952,973 high value Nano-TIC equipment electronic part field • Operating equipment specialists 530,000

• Training & technical support LINC KPU KPU Sharing Univ. Avg. 1st Year 2nd Year equipment *LINC Univ. Avg: LINC Participate Univ 1st Y. Results Avg. support center

The functions of the TBI (Technical Business Incubator) are consulting and holding seminars on the overall management of startup companies such as business space,

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 115 technology, patent and prototype support, management consulting, public relations assistance, funding and connecting arrangements to offer pre- and new company founders efficient support based on the knowledge, technology and information possessed by universities.

In 2014, 23 businesses including three in machinery, three in electronic engineering, one in chemicals, four in software, two in ICT and two in bio-related fields were incubated at the TBI, earning revenue of KRW 14.7 billion with 139 employees. KPU has supplied TBI tenants with general technical support essential to their growth such as in company operations, management, accounting and marketing along with technical assistance for startups. Thirty-one stable tech companies have been created through TBI support, showing the program’s active support for the growth of startup companies through close links among professors, students and businesses.

[Figure 2-22] General Functions of TBI in KPU

• TBI (Technology Business Incubator Center)

Support for • Support for inquiry, analysis and application on domestic and foreign patents Technologies • Support provided by dedicated advisory professors by company and Patents • Provision of the latest technological information through Partner Company System

Support for • Manufacturing support through Machining Center manufacture of • Establishment of mass-production system through the use of equipment owned by experimental products Research Center in the university and provision of consulting

Support for • Support for management, accounting, patent, laws, finance and marketing promotion of • Provision of information material on various gov. policy tasks and consulting managerial consulting • Participation in various exhibitions, production of brochures and support for promotion

• Technological development through agreement institutions and financial institutions and Arrangement for arrangement for operating fund-raising fund-raising • Proactive inducement of outside venture funds in connection with Gyeonggi Angel and venture capital firms (Lumistal invested 1.2 billion won)

116 • 2014/15 Knowledge Sharing Program with Mexico [Figure 2-23] Achievements of KPU’s TBI

• Successful Achievements in Technology Business Incubator Center As of December 1, 2013

The size of • The total building floor area: 2,407.2 m2 the center • The total floor of Incubation Center: 1,070.7 m2

Specialized • Nano-optical engineering, machinery, ultra-precision parts and others business total Machinery Electricity/ Chemical S/W ICT Bio Other Incubation Electronics Companies 22 3 10 1 4 2 2 0

Employment 35 (incl. CEO (22)) Corporate 60 companies graduated (2012 yr: Tmate Co., Dalguzi Co., Chiron Technology Co.) Sales 2012 year: $ 3,988,585 Achievements in incubation Total Patent Trademark Design Utility model S/W Other 2012 yr. IP right 6 11 (5 registered)

3.3. LINC Program of KPU

The Ministry of Education has promoted the Leaders in IAC project, a five- year project from 2012 to 2017. KPU has carried out this project for enhancing the technological development of companies in the cities of Siheung and Ansan in Gyeonggi-do.

The KPU vision of the project is to allow regional universities become leaders in their regional industries through the strengthening of win-win IACs, intensify the technical competitiveness of regional businesses, secure an employment rate of 85 percent by training customized and practical human resources for the creation of quality jobs, and strengthen the support system for regional industries.

Also, LINC seeks to offer win-win effects to about 4,000 partner companies by promoting sustainable advanced IACs, reinforce the partner company network for national industrial complexes in the southwest region, where the KPU is located, and set a foundation for developing corporate human resources and technical innovation competencies. Other objectives are to build a sustainable and open IAC system, specialize in the regional industrial base, cultivate customized human resources, build a constant IAC system and support businesses.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 117 [Figure 2-24] LINC Programs of KPU

Leading University for Regional Industry Development based on the IAC

4000 partner Companies % of Employment Tailor Made Education

Buildup Strengthen Consolidate University’s System Education Capacity Partner Company System

System Infra Components Link • Partner Company • E/H, TBI, ESC • Education Program • Technology- System • IAC Support related with Design- KPU’s Regional Industry Management • Practical Education Center LINC Program System • IAC Support Collaboration • R&D Cooperation Program with • IAC Committee System Regional Industry Commencement Industry-Academy R&D for of Work Cooperation Business

3.4. Organization & Main Achievements of IAC Program

A KPU organization effectively promotes the IAC program, as shown below: The IAC team aims to support IAC projects to improve the research results, expand research opportunities for faculty and improve research capabilities to help KPU become a world-renowned educational institution for IAC.

Its main tasks are as follows:

- Research support and management tasks include the operation and management of research support, promotion and planning of research, implementation and management of research, and management of the research center. - Purchase and contract agreements include those for research equipment, general services, foreign equipment and other products. - Financial and accounting duties include supervision of funding and budgeting, accounting, settlement and payroll for account researchers, corporate card management and cost management. - Operations of the organization include management of IAC contact workers, running of the operating committee, and amendments to and establishment of regulations.

118 • 2014/15 Knowledge Sharing Program with Mexico [Figure 2-25] Structure of KPU Organization for Supporting IAC

Director

Committee

IAC Promotion Division Industry-Academy Research Management Center Relations Division Industry-Academy Partner Company Facilitation Team Support Center LINC Project Team Technology Eng. House Commercialization Team Commercialization Center Start-up Support Project Team

KPU Center for Facilities LED Center

Industry-Academy High Value PCB Joint Cooperation Center Research Center Advanced Technology Business Incubation Center Cooperation Project Team

Start-up Education Center Electric Power Saving Center

IT Convergence Rehabilitation Medical Device Research Center Industry-University Convergence Campus Project Team

The Consortium Center at KPU was built in 2001 to oversee the technical development project supported by the SMBA, and was renamed IAC Center for SMEs the same year. The center has comprehensively managed and conducted its IAC project for SMEs.

The center supports the joint technical development of universities and think tanks and is equipped with excellent research bases. It also offers support for the first step in technical development, advancement of the latter and the new installation of think tanks affiliated with businesses.

The main tasks of the Onsite Training Support Center are:

- Onsite training helps students to work with onsite engineers with abundant practical experience. On-site knowledge and techniques are used to develop leaders of industrial technologies in the knowledge-based industrial society of the 21st century. University guidelines are also provided through the regular curriculum to accomplish KPU’s education goals. - The center manages training institutions related to onsite training, demand matching between trainees and institutions, and program training support.

The main tasks of the Nano-Technology Innovation Center (Nano-TIC) are:

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 119 - Nano-TIC is a project promoted by the government for stimulating technical innovation in the region, and 42 regional Nano-TICs have been designated throughout the country. - The main purpose of the project is to conduct joint research development among businesses, universities and think tanks by specializing in one area such as machinery or auto parts and electronic or chemical components, which are in high demand in the region. The centers receive state financial support to distribute and commercialize technologies.

KPU was newly designated a Nano-TIC in 1995 to innovate the machinery component industry around the Banwol- Siwha industrial complex.

The LED center has the following goals:

- Conduct new technical development of lighting, displays and environment-field LEDs, industrialization of applied technologies and, HRD in LED, IT and fused smart lighting

Other centers conduct IAC programs other than the above center. New projects and centers are formed in consultation with the government on a yearly basis and support SMEs in a variety of fields.

The main achievements of KPU’s IAC programs in 2013 were:

KPU Achievements in IAC Programs

Supporting Gov’t Annual Costs Project Name Period Dept. (As of 2012)

Ministry of Trade, Industry-Academy Convergence District Industry and Energy 5 years US$2.23 million Development Project (QWL) (MOTIE)

LINC (Leaders in Industry-University Ministry of Education 5 years US$330,000 Cooperation) Project (MOE)

Industry-Academy Convergence MOTIE 5 years US$ 170,000 Technology Education Support

Leading Business Foundation SMBA 5 years US$ 200,000 University Development Project

High Value-added PCB MOTIE 5 years US$ 120,000 Joint Research Base Development Project

120 • 2014/15 Knowledge Sharing Program with Mexico 3.5. KPU's Practical Education

Engineering education for training technical experts at KPU consists of half theory and half practice. All students must complete 140 credits under the regulations of the Ministry of Education. Practical education through IAC programs are as follows:

- All practical education programs are done along with companies. Five programs are shown in Table 2-7. - This includes training in which students go to or perform with companies at the university. The former has practical education (internal) and internship programs conducted by partner companies. - This includes training in which students go to companies and that which students perform with companies under the university’s supervision. The former is the practical education (internal) and internship programs conducted by partner companies, and the latter is the practical education program conducted at E/H of KPU for juniors and seniors, who can earn two to three credits. - A practical education (abroad) training program is conducted in conjunction with foreign companies for freshmen and sophomores, who can earn four to 14 credits.

Practical Education of KPU

Student Term Credit Subject (Credit) Remark Practical Education (Internal) 2~4 year 4~12 weeks 2-6 Compulsory (4) In Company In Company Practical Education (abroad) 2~4 year 4~14 weeks 4-14 abroad E/H Education 3~4 year 30~45 hours 2-3 In KPU Internship Program 4 year 90~240 hours 3-8 In Company School & Term Project 4 year 45 hours 3 Compulsory (6) Company

- Preparing the IAC Education Programs with Cooperation of Company - Participation of professors from the University and Engineer from Company

- Partner Company E/H, ESC etc. - Techno Innovation Park, QWL (Quality of Working Life)

- KPU’s Engineering Education (140 credits / 4 Years) - Theoretical Training (50%), Experiment Training (50%)

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 121 4. Establishment of CAI Centers in Mexico State 4.1. Direction of CAI Project for Strengthening SME Competitiveness

4.1.1. Government Policy for Supporting IAC Project in Mexico State

As mentioned in Chapter 1, the four universities involved in the pilot plan for setting up IAC (CAI is the Spanish acronym of IAC) centers are well-qualified to regulate the development of the center’s main functions such as teaching, research, links with the public, private and social sectors, and formation of the internal legal framework.

In this context, a non-profitable auxiliary organization within each of the universities is highly recommended for forming a legal internal framework to define its functions.

To support this project, assigning an annual budget and human resources for functions are vital as well as providing infrastructure and equipment used exclusively for the organization within each of the universities’ facilities.

Proposed policies and programs:

- Economy Ministry The ministry could establish a National System of Industry-Academia Cooperation Professors, similar to the National Researchers System (SNI), where professors could demonstrate and get recognized for their research results in IAC, which will require financial support for professors who prove their industrial worth. Resources could also go toward the creation or enhancement of Engine Support Centers; these centers will be used by industries but located and administered by universities. The ministry can also create a fund to reduce fees charged to businesses to use CAI centers.

- Education Ministry The government should make policies and plans for the CAI center. In order to prepare its establishment and operation, it needs to enact the law, and prepare the budget for equipment, human resources, and other financial support. Then, the policy could create campuses of universities involved in the CAI program, within the main industrial complexes, to allow the enterprises to get closer to the CAI program, and to provide the researchers a chance to directly

122 • 2014/15 Knowledge Sharing Program with Mexico contact the enterprises.

4.1.2. Direction for Forming and Operating CAI Center According to 3 Stages

The vision of the CAI center is to stimulate development of regional industries, lead innovation of high education in engineering and create new businesses and jobs.

The CAI center has two main objectives: prepare a plan for building a center including its operations and create strategies for supporting center development.

To establish and start a CAI center, universities and the government of Mexico State must undergo the following three stages:

- First Step: This report shows the plan of establishment and operation of the CAI center to be installed at four universities, including construction specifications and organization of its operations.

- Second Step: The four universities should each install a CAI center, which is a standard model for promoting IAC with businesses. To run a CAI center, two programs are needed, one for practical education for students and the other being an R&BD program promoting new businesses for companies. The center’s objectives are: Setting up CAI centers at four Mexico State universities, namely Tecamac Technological University, Mexico Valley Polytechnic University, Jocotitlan Technological Institute and Coacalco Technological Institute. The establishment, operation and strategies of the centers are defined under the state’s education minister. Once the first and second steps are completed, a support mechanism will be established so that these four universities mentor other universities in the state on forming their own CAI centers. Mexico state education officials proposed and authorized strategies. Each university will define the industries to participate in CAI centers, develop their plans for business development and accompanying operations in subjects such as production, marketing, finances, tax and law. The four schools will also identify their technical, equipment and human resources needs, and offer consulting from full-time professors. - Third Step: After establishing and operating pilot CAI centers at the four universities, the

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 123 centers need to spread to other universities in Mexico State. To accomplish this goal, each of the four universities will introduce two partner universities to transfer knowhow on the CAI center’s establishment and operation, defining human resources and financial needs for the centers.

The proposed universities are: - Mentored by TESCo: Ecatepec Technological Institute and Otzolotepec Polytechnical University - Mentored by UPVM: Cuautitlan Izcalli Technological and Cuautitlan Izcalli Polytechnical University - Mentored by UTTEC: Fidel Velazquez Technological University and Netzahualcoyotl Technological University - Mentored by TESJo: San Felipe del Progreso Technological Institute and Atlacomulco Polytechnical University.

All of the above ideas can be summarized in the next diagram:

[Figure 2-26] Direction for Establishment of CAI Center

• Vision: Enhancing SME’s Competitiveness in the Mexico State - Development of Regional Industry - Innovation of High Education in Engineering Fields - Creating New Business and Jobs

CAI Center

Students Universities Regional Industry/Enterprise • To be an Engineer through Practical • Prepare Infrastructure for Practical • Sustainable Growth Based on the CAI Education Education and Cooperation Program • Have a role as an Engineer in many • Growth based on the CAI Center with • Building Structure for Enterprises Projects Partner Companies based on the CAI Growth • Get a job through the CAI Program Center

1st Step 2nd Step 3rd Step Planning for building CAI Center Establishment and Operation of the CAI Expanding the CAI Center to other • Direction of CAI Center Establishment Center Universities in the Mexico State Estimating and Operation • Select Industries and University for CAI of Operation Results of CAI Center • Strategies for Development of CAI Center • Education and R&BD Achievements Center • Supply Budget for CAI Center Operation

4.2. Concept and Configuration of CAI Centers

The concept and configuration of CAI centers are the same as KPU’s IAC functions. The objectives of the centers are:

124 • 2014/15 Knowledge Sharing Program with Mexico - Promote cooperation between businesses and universities - Raise SME competitiveness by advancing HRD and R&BD.

[Figure 2-27] Concept and Configuration of CAI Centers

Objects: • Promoting Cooperation between Enterprises and University • SMEs’ Competitiveness by promoting HRD and R&BD

• HRD: Nurturing Technologies Engineers • R&BD: Supporting SMEs’ research, Test etc.

• Establishment of CAI Center: E/H, TBI, ESC etc. • Operation of CAI Center: HRD, R&BD Program

CAI Center

Government Policy and Plan for CAI Center • Ministry of Education, To extend current R&D Dual Education System CONACyT, COMECyT, Mexico Programs State Government

Basis: Legal, Organization for promoting CAI Program

The legal basis and organization for promoting the CAI program are plausible due to the ability of universities per their internal legal framework as stated in their constitutive acts, which will provide the legal basis for the creation of an internal auxiliary organization and rules for CAI center functions.

Certain policies support IAC research and projects, but the recommendations mentioned in Section 4.1 could be considered.

The R&BD section will be in charge of attracting and evaluating industries for participation, project R&D and support for students involved in the projects. The students shall be selected according to the project’s needs per the sufficient number needed for running it properly. This area will have the proper number of full-time professors to accompany companies.

One function universities could provide is helping the state’s sci-tech companies to get them registered with RENIECyT (National Registry of Scientific and Technological Institutions and Enterprises), so that they have access to CONACyT funding programs to support their scientific and technological development.

R&D programs in the institutions are based on the will of researchers, and are not

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 125 adequately supported in equipment, facilities and finances.

To support IAC and strengthen links with nearby industries, revision of internal rules of R&D is needed.

Since the dual education system provides a practical education for students in industrial fields, this can be considered the basis for implementation of CAI centers.

Under such a basis, CAI centers can be set up in each university with components such as Engineering Houses (E/H), Technology Business Incubators (TBI), Equipment Support Centers (ESC), administrative offices and other facilities like ATMs, restaurants and fitness centers.

For preparing CAI center operations, two programs are needed: one for giving practical education courses to students as part of HRD and the other for providing facilities for SMEs’ new products as part of research and business development (R&BD).

Industries are continuously developing through support from CAI centers, namely by employing specialized engineers who received practical education and by benefiting from cooperation with universities in new products and businesses.

4.3. Process of CAI Center’s Establishment in Mexico State

According to Section 1.3, Mexico State’s primary industrial sectors are those related to the food industry and the manufacturing of metallic and plastic products, textiles and chemicals. Behind these sectors are a variety of techniques and technologies applied in each process.

- Control, Automation & Artificial Intelligence - Electronics - Food Processing Technologies - Biotechnology - Chemistry - Mechanical Design & Material Analysis - Manufacturing & Logistics

For a smooth start of CAI centers, universities should request to their board of directors permission to set up an internal auxiliary organization to provide legal support, administer the start of operations and manage the human resources to operate the organization.

126 • 2014/15 Knowledge Sharing Program with Mexico These technologies to run the centers will be covered in accordance with each university’s major strengths and research technologies fields. The proposed technologies for R&D in each CAI center are shown in the following table:

Procedure of Establishing CAI Center

CAI Center Programs at CAI Center Control & Automation TESCo Electronics PLC Technology Processed Food Technology Pharmaceuticals UTTEC Biotechnology Chemistry Control & Automation Materials Analysis UPVM Manufacturing Mechanical Design Artificial Intelligence Control & Automation TESJo Logistics & Manufacturing Industrial Design

To adapt new technologies (mentioned in the table) from Korea, the Mexico- Korea CAI committee (more detailed explanation available in 4-6) should recommend related technologies that CAI centers should produce.

- Adequate facilities and required infrastructure, training of assigned personnel for implementation. - Assign budget for center operation

shows the infrastructure the four universities need to establish CAI centers.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 127

Plan for Establishing CAI Center at Each University (Unit: number of building) CAI Center 2015 2016 2017 E/H 3 6 10 UPVM TBI 1 0 1 ESC 2 2 5 E/H 5 6 9 TESJo TBI 1 2 3 ESC 1 2 5 E/H 3 6 12 TESCo TBI 1 2 3 ESC 1 2 5 E/H 1 2 3 UTTEC TBI 1 1 2 ESC 1 2 3

4.3.1. Space Program for Pilot CAI Center

The space program for CAI centers is defined by each of the four universities according to individual needs and capabilities, as well as the industrial environment.

- Tecnológico de Estudios Superiores de Jocotitlán Jocotitlan Technological Institute will launch its CAI center with electromechanical technology, industrial engineering, and computer systems technology.

Space Programs for CAI Center at TESJo

Year Type 2015 2016 2017 Small Scale (<100m²) 405 m² 90 m² 450 m² Medium Scale (<150m²) 0 m² 600 m² 450 m² E/H Large Scale (>150m²) 0 m² 0 m² 155 m² TOTAL 405 m² 690 m² 1,055 m² Small Scale (<50m²) 0 m² 100 m² 40 m² Medium Scale (<100m²) 85 m² 0 m² 170 m² TBI Large Scale (>150m²) 0 m² 0 m² 0 m² TOTAL 85 m² 105 m² 210 m²

128 • 2014/15 Knowledge Sharing Program with Mexico

continued

Year Type 2015 2016 2017 Small Scale (<200m²) 125 m² 475 m² 450 m² Medium Scale (<300m²) 0 m² 0 m² 440 m² ESC Large Scale (>300m²) 0 m² 0 m² 0 m² TOTAL 125 m² 475 m² 890 m² Tech Support Center 1 1 1 Dormitory 1 10 20 Facilities Restaurant 1 1 1 ATM 1 1 1 Offices Office Room 80 m² 170 m² 200 m²

- Tecnológico de Estudios Superiores de Coacalco

Space Program for CAI Center at TESCo

Year Type 2015 2016 2017 Small Scale (<100m²) 100 m² 100 m² 200 m² Medium Scale (<150m²) 0 m² 150m² 200 m² E/H Large Scale (>150m²) 0 m² 0 m² 0 m² TOTAL 100 m² 250 m² 400 m² Small Scale (<50m²) 50 m² 50 m² 50m² Medium Scale (<100m²) 0 m² m² m² TBI Large Scale (>150m²) 0 m² 0 m² 0 m² TOTAL 50 m² 50 m² 50 m² Small Scale (<200m²) 150 m² 50 m² 100 m² Medium Scale (<300m²) 0 m² 200 m² 200 m² ESC Large Scale (>300m²) 0 m² 300 m² 300 m² TOTAL 150 m² 550 m² 600 m² Tech Support Center 1 (330 m²) 1 (70 m²) 1 (100 m²) Dormitory 1 1 1 Facilities Restaurant 10 20 20 ATM 0 1 1 Offices Office Room 150 m² 150 m² 200 m²

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 129 - Universidad Tecnológica de Tecámac

In the first year, the TBI should start with 20 m² of space according to

, and extend it from 49 m² to 60 m² in the second and third year.

In the first and second year, two E/Hs will be established with a combined area of 70 m² each, and in the third year, the E/H will double in size when built for operations.

As for the first year of the ESC, it will start with 150 m² that will continue in the second year; in the third year, the area will be expanded to 200 m².

At the start of the CAI center’s operation, UTTEC will concentrate on food processing, pharmaceuticals and biotechnology.

Space Programs for CAI Center at UTTEC

Year Type 2015 2016 2017 Small Scale (<100m²) 70 m² 70 m² 0 m² Medium Scale (<150m²) 0 m² 0 m² 140 m² E/H Large Scale (>150m²) 0 m² 0 m² 0 m² TOTAL 70m² 140m² 210m² Small Scale (<50m²) 20 m² 49 m² 0 m² Medium Scale (<100m²) 0 m² m² 60m² TBI Large Scale (>150m²) 0 m² 0 m² 0 m² TOTAL 20 m² 49m² 60m² Small Scale (<200m²) 150 m² 150 m² m² Medium Scale (<300m²) 0 m² 0 m² 200m² ESC Large Scale (>300m²) 0 m² 0 m² 0 m² TOTAL 150 m² 200m² 250 m² Tech Support Center 1 1 1 Facilities Restaurant 1 1 1 ATM 0 0 1 Offices Office Room 1 1 2

.

- Universidad Politécnica del Valle de México

The university will prepare the following infrastructure for promoting the four technological fields with businesses as mentioned in

:

130 • 2014/15 Knowledge Sharing Program with Mexico

Space Programs for CAI Center at UPVM

Year Type 2015 2016 2017 Small Scale (<100m²) 0 m² m² m² Medium Scale (<150m²) 160 m² 160 m² 0 m² E/H Large Scale (>150m²) 0 m² 0 m² 646 m² TOTAL 160 m² 160 m² 646 m² Small Scale (<50m²) 0 m² 0 m² 0 m² Medium Scale (<100m²) 50 m² 0 m² 0 m² TBI Large Scale (>150m²) 0 m² 0 m² 0 m² TOTAL 50 m² 0 m² 0 m² Small Scale (<200m²) 0 m² m² 0 m² Medium Scale (<300m²) 100 m² 200 m² 0 m² ESC Large Scale (>300m²) 0 m² 0 m² 943 m² TOTAL 100 m² 200 m² 943 m² Tech Support Center 1 0 1 Facilities Restaurant 0 1 0 ATM 0 1 1 Offices Office Room 1 1 1

.

4.4. Organization for CAI Center Operation at University

For the effective operation of a CAI center, this report presented the proposed organization in [Figure 2-28].

One director should be responsible for managing the center and presenting potential projects to the committee. The committee will receive support from the directors of other CAI centers at Mexican partner universities and from business entities in Mexico State. The use or creation of a figure is suggested for linking the sub-director in charge of industry-university linking activities.

According to this organization, three people will ensure completion of the process of the CAI center: the director; the linking subdirector who will oversee the teams for industry-academia facilitation, technology commercialization and cooperation, and centers for E/H commercialization, industry-academia cooperation and business incubation; and a department chief to supervise the LINC project and start-up support project teams.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 131 [Figure 2-28] Organization of CAI Center

Director

Committee

CAI Promotion Division and Industry-Academy Relations Research Management Center CAI Promotion Division

Industry-Academy E/H Commercialization Center LINC Project Team Facilitation Team

Technology Industry-Academy Cooperation Center Start-up Support Project Team Commercialization Team

Cooperation (Mexico-Korea) Business Incubation Center Team

Partner Company Support Center

In the third stage, the organization will be expanded to 12 people with each put in charge of a specific activity.

Director

CAI Promotion Division • Technology commercialization team • Industry-academia facilitation team • Cooperation team

Industry-Academia Relations Division • Partner company support center • E/H commercialization center • Industry-academia cooperation center • Business incubation center

Research Management Center • Founding searching and startup support project team

132 • 2014/15 Knowledge Sharing Program with Mexico [Figure 2-29] Organization of Next Stages

Director

Committee

Industry-Academy CAI Promotion Division Research Management Center Relations Division

Technology Partner Company Founding Searching and Commercialization Team Support Center Start-up Support Project Team and Industry-Academy Facilitation Team E/H Commercialization Center Cooperation (Mexico-Korea) Industry-Academy Team Cooperation Center

Business Incubation Center

4.5. Cooperation Program for Exchanging Technologies and Products via Mexico-Korea CAI Committee

This report proposes the setup of a Mexico-Korea CAI committee for promoting exchanges between both countries, which will involve technology, human resources, merchandise, knowledge transfers and production. For this, the following conditions are required:

- The main objectives and functions of the committee are to identify opportunity areas of Korean technology and products, knowing the products and target markets as well as their production needs for technology transfer, and authorize projects to be pursued at a CAI center. Selected Mexican businesses for CAI center collaboration shall take advantage of Korea’s technological and industrial development, and Korean industry shall take advantage of Mexico’s strategic location and labor. The committee’s duties and roles are the following: - Suggest the acquisition of necessary equipment for production, practical education for students and training for supervisors and workers - Authorize the CAI center’s budget - Recommend to each university in identifying the pilot product to promote technology exchanges between Mexico and Korea - Verify setup of human resources, facilities and equipment to provide technical and technological support to Mexican industry for supporting product development - Implement rules on development of student internships with CAI center’s partner companies

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 133 - Select students with proper profile for participating in each internship between both countries - Support exchanges of technology, human resources and goods between both countries

The committee shall also faithfully keep records on CAI center results, which can be used by students and professors in future projects.

Universities develop students into specialized engineers with a project comprised of half practical and half theoretical education programs which include one or two internships in a productive sector.

The universities need concrete collaboration with businesses akin to KPU’s partner company system. Then students can take practical education based on the partner companies through the CAI center.

The center should provide practical education to Mexican students with KPU cooperation.

4.6. Future Plan for Commencement of CAI Center and Recommendations

4.6.1. Overview

To effectively strengthen SME competitiveness in Mexico State, this study shows the optimal way for IAC programs to adapt the experience of KPU’s IAC.

A major recommendation of the KSP study is that pilot CAI centers should be established at universities and need to expand to other universities.

Based on the progress of this KSP project, the conclusion is that not only will the four universities open CAI centers in September, but pilot products will also be produced at the centers.

[Figure 2-30] and Table 2-14 show the plans for the commencement of pilot CAI centers.

134 • 2014/15 Knowledge Sharing Program with Mexico [Figure 2-30] Short-term Plan for CAI Center Opening & Pilot Products

Space Program for CAI Center Organization Education Program R&BD Program * E/H for CAI Center

CAI Center * TBI (ManPower Opening CAI Center * ESC & Budget) * Office Operating Manual • E/H Prepare - Select Companies Opening Center • Setup • TBI - Equipment for office - Select Companies • E/H(Engineering/House) - Equipment for R&D • TBI(Technology Bussiness Incubator) - Equipment for Products • ESC • ESC(Equipment Supply Center) - Test/Operation

Select 4 Items Dispach Assembly Test Announce Pilot Products Pilot Products 1 Items / Univ. Components for Sample test Test Products 2 Products 1 (Pilot & P/P) (E/S) • Design Assembly Plant • Setup Plant - Space, Equipment - Equipment

2015” 1M 2M 3M 4M 5M 6M 7M 8M

Before opening the center, the required preparation is as follows:

First, E/H, TBI and ESC must be installed at the center with the proper equipment.

Second, the operating manuals for operation of the CAI center should be available, including the program of operation for practical education.

For producing pilot products recommended by the Mexico-Korea CAI committee as selected by Korean companies, the plants for producing the items should be built within CAI centers. The budget and programs for the plants should be prepared by the Korean companies.

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 135

Major Contents of CAI Center’s Opening Plan

1 M 2 M 3 M 4 M 5 M 6 M

- Fix Space Program for the - Fix Space Program for E/H, ESC, TBI - Prepare Operating Manual CAI Centers in 4 Univ. for E/H, ESC, TBI - Set up E/H, ESC, TBI CAI Center - Fix Scale of 4 Components - Prepare the equipment for E/H - Prepare Practical Education (E/H, TBI, ESC, Partner Company) Program in CAI Center - Select Companies for E/H - List of equipment for E/H, TBI, ESC - Prepare Manual for Operation - Prepare IAC supporting Program in CAI Center - Prepare Organization for the - Seclect New Business for TBI CAI Center

- Select 4 Items for Pilot - Planning Pilot Plants for 4 Items Step 1) Products - List of the equipment for Pilot Plants - Set up Pilot Plants in 4 Pilot Products - Visiting Related Korean Universities - Processing plan fot the pilot Companies production - Produce Pilot Items - Estimate Market Volume in - Planning assembly production for Mexico for Pilot Items Step 2) 4 Items - Manufacture the mass - Parts’ List of 4 Items Production - Training manpower for Pilot Line

4.6.2. Recommendations

For success in this KSP program, the following are required:

- Mexico and Korea should build sustainable relationships, and exchanges of technology and human resources should be supported by the Mexico-Korea CAI committee based on Korea’s experience. - An operational plan for the CAI center’s efficient operation is needed after everything is set up, adapting KPU’s experience. - The government of Mexico State needs to prepare policies and budget for promoting CAI centers. - For the pilot CAI center to catch on at other universities, the Mexican federal government needs to prepare and implement plans like the LINC program of Korea. - To improve IAC programs, the universities should build networks with businesses through CAI centers, the partner company system of KPU, for example, and implement IAC programs based on business networks.

136 • 2014/15 Knowledge Sharing Program with Mexico References

OECD, OECD Reviews of Innovation Policy: Mexico 2009, Paris: OECD Publishing, 2009, http://www.oecdilibrary.org/oecd/content/book/9789264075993-en. Observatory of Economic Complexity, “Trade in Mexico,” MIT Observatory of Economic Complexity, 2015, http://atlas.media.mit.edu/profile/country/mex/. Banco de Mexico, Stocks and flows of international assets of Central Bank of Mexico,” Banco de Mexico, 2015, http://www.banxico.org.mx/SieInternet/consultarDirectorioInte rnetAction.do?accion=consultarCuadro&idCuadro=CF169§or=4&lscale=es. Secretariat of Labor and Social Welfare, Estado de Mexico, (in Spanish) Secretariat of Labor and Social Welfare, 2015, http://www.stps.gob.mx/bp/secciones/conoce/areas_atencion/ areas_atencion/web/pdf/perfiles/perfil%20estado%20de%20mexico.pdf. World Bank, “Country and Region Specific Forecast and Data,” Global Economic Prospects: The Global Economy in Transition World Bank, 2015, http://www.worldbank.org/en/ publication/global-economic-prospects/data?variable=NYGDPMKTPKDZ®ion=LAC. Banco de Mexico, “Rate Inflation,” Banco de Mexico, 2015, http://www.banxico.org.mx/ portal-inflacion/inflacion.html. Banco de Mexico, “International Assets, Domestic Credit and Monetary Base,” Banco de Mexico, 2015, http://www.banxico.org.mx/SieInternet/consultarDirectorioInternetActi on.do?accion=consultarSeries. “Exchange Rates and Historical Results,” (in Spanish), Banco de Mexico, 2015, http://www.banxico.org.mx/SieInternet/consultarDirectorioInternetAction.do?accion=consul tarCuadro&idCuadro=CF373§or=6&locale=es. National Council of Science and Technology, ”National Council of Science and Technology, 2015. http://www.conacyt.mx/index.php/el-conacyt National Statistical Directory of Economic Units, “Economic Activities,” National Institute of Statistics and Geography, 2015. National Institute of Statistics and Geography (INEGI, 2010) DENUE, INEGI, 2015 Korean Ministry of Education (SEP, 2014) Korea Development Institute, 2012, “Fostering technical human resources through Korea Polytechnic University” Main performances for first stage of Leaders in LINC (2014) 05-09 (Fri.) Daily press (Evaluation Announcement of Leaders in IAC Project, (2014) Final attachment

Chapter 2 _ Improving Industry-Academy Relation Capacity for the Secretariat of Public Education of the State of Mexico • 137 Regional Innovative Human Resource Development Project by Ministry of Education (2013) News release by Ministry of Trade, Industry and Energy, September 4 (2013) 2015 Industry Innovation Business Guide - Ministry of Trade, Industry and Energy 2015 Presentation on Academic-industrial Collaborative Technology Development Project, Small and Medium Business Center, Industry-Business Cooperation Foundation, Korea Polytechnic University

138 • 2014/15 Knowledge Sharing Program with Mexico 2014/15 Knowledge Sharing Program with Mexico: Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy Chapter 3

Fostering Hidalgo’s Transformation into Knowledge-based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities

1. Introduction: Why Does Hidalgo Need Science, Technology & Innovation? 2. Korea’s Experience and Approaches toward Hidalgo 3. Innovation Resources of Hidalgo and Evaluation 4. KSP Consultation for Hidalgo - Process and Contents 5. Evaluation & Recommendations ■ Chapter 03

Fostering Hidalgo’s Transformation into Knowledge- based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities

Kyong Soo Kim (Korea Display Industry Association) José Alonso Huerta Cruz (Council of Science, Technology and Innovation for Hidalgo)

Summary

The State of Hidalgo in Mexico seeks to secure a new engine to drive economic growth, form industrial clusters and become a knowledge-based economy. As a tangible project, the state government has developed the “City of Knowledge” project to achieve industrial and innovation development in the region through the promotion of four elements: R&D + innovation (R&D+I), scientific and technological infrastructure (STI), highly specialized human capital (HC) and knowledge culture (KC). The main objective of the 2014/15 KSP for the State of Hidalgo has been to foster Hidalgo’s transformation into a knowledge-based economy through the development of City of Knowledge, an industrial innovation cluster based on theoretical criteria promoted and invested in by the state government as a new driver of growth.

Hidalgo’s ultimate vision of transforming its socio-economic system into a knowledge economy through City of Knowledge development is closely related to Korea’s experiences, as the latter is considered good references for Hidalgo’s development. Korea has been acknowledged as a successful model by the OECD in its transformation from a light industry economy to one based on knowledge. Over its period of rapid economic development and industrialization, Korea put a lot of efforts and policies into setting up an ecosystem of industrial clusters and innovation centers and saw good results, albeit with a few mistakes. The country’s three types of industrial clusters are nation financial-supported techno-parks, regional strategic

140 • 2014/15 Knowledge Sharing Program with Mexico industries and industrial clusters at national industrial complexes. Industrial clusters are backed by Korea’s national innovation system (NIS), regional innovation system (RIS) and nationwide innovation ecosystem, and form the core factors for the success of Korean economy. So Korea’s experience as well as international studies on the general concept and characteristics of the international industrial cluster and innovation ecosystem is essential for formulating future industrial and technology policy for Hidalgo, especially for its City of Knowledge project.

Per international studies, industrial cluster policy is well known for providing advantages in making the industrial transformation and enhancing international competitiveness, as was explained by professor M. Porter (1989, 1990). But in the proceedings of such innovation cluster and ecosystem policy behind, a few facts must be considered. First, physical hardware is not enough to guarantee a successful in industrial cluster policy. Second, competition around the world to enhance industrial competitiveness has grown fierce, so an industrial cluster policy and innovation ecosystem should be based on global trends. Third, leadership and relationships among stakeholders and innovation actors are growing more important and complicated. Fourth, the shift to the upper hierarchy of the innovation hub frame requires that different policies should be adapted following the frame.

In context of the City of Knowledge project, Hidalgo has done well in formulating the first stage of the policy. Through its federal government policy, the state succeeded in attracting a nationally prominent vocational university. And under the overall master plan for construction, a lot of buildings and facilities have been built. Infrastructure itself, however, does not guarantee or stimulate communication and interactions among innovation drivers related to the City of Knowledge project.

For a future policy geared toward industry and the innovation ecosystem, the most important issue is the role of high-level political leadership. The state government needs to build a holistic governance system for innovation that embraces all officials from each level related to the development of the program; but the system must ensure regular ministerial-level meetings led by the governor. The meetings should focus on designing a more detailed master plan for the city, promoting the city’s brand value and creating an operational system within the city. In other words, political leadership by high-level officials is crucial for the design of the governance system, and this role should not be limited to mere financial support.

Also, the federal government's role is important given that it is still required to continue financial support and evaluates the progress of the STI ecosystem’s creation in the program. The second issue is to ensure the industrial targets in Hidalgo are appropriate. The focus of policy should be narrowed down into fewer industries because Hidalgo has a weak industrial base and scarce resources for industrial

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 141 innovation. The third issue is to promote communication and information to align related policies and innovation activities. Lastly, to guarantee sustainable regional development in innovation, skilled workers should be encouraged to keep upgrading their knowledge and skills through continuous education. Over time, they could find themselves capable of conducting their own research at laboratories.

In conclusion, Hidalgo has succeeded in the first phase of its innovation policy, but must concentrate more on identifying and integrating the available resources and motivating and integrating innovation actors in the region in innovation. The KSP team is confident of success if concerns and endeavors are put toward that direction.

1. Introduction: Why Does Hidalgo Need Science, Technology & Innovation?

Hidalgo has implemented its City of Knowledge initiative since 2012, which seeks to develop the state and its capital Pachuca de Soto into a hub for knowledge-based economy while setting up and running a techno park, City of Knowledge, as a key factor of the initiative. To achieve its goals, Hidalgo has proposed a project from the 2014/15 KSP to review Korea’s experience in transforming itself to a knowledge- based economy and managing techno parks with the integration of science, technology and innovation.

According to Panorama Minero del Estado de Hidalgo (Overview of the Mining Industry of the State of Hidalgo) published by the Mexican Geological Service, the basic industrial structure of Hidalgo has traditionally been based on mining. From the sixteenth century to 2013, the accumulated volume of silver produced in the state amounted to 40,000 tons, or 16 percent of Mexico’s production of silver and six percent of global output of the metal. This silver production and the mining industry, in turn, contributed to Hidalgo’s economic growth, and the Mexican federal government decided to directly manage the state’s mining industry in the middle of the 20th century.

Hidalgo, however, inevitably faced resource depletion and the ensuing decrease in silver production before the recent global rise of silver prices thanks to China’s rapid economic growth. A shift in the industrial structure from the mining to general manufacturing was urgently needed to escape the recession trap. For continuous economic development, a lot of policy issues such as enhancing the enrollment ratio, vocational training system, and industrial policy are required. For industrial development, Hidalgo has adopted three important strategies. The first is to create a strong foundation for R&D in the state. Hidalgo has sought to attract the federal government R&D agency as well as private R&D centers. The second strategy is to

142 • 2014/15 Knowledge Sharing Program with Mexico build an industrial techno park, which is usually built with public financial support. And the third is to provide land facilities, a concept of the industrial park for a business complex. Several industrial complexes have been provided. Furthermore, as an adjoining state to the Mexico City metropolitan area, Hidalgo added the crucial initiative of transforming its industrial structure to aim to become a knowledge economy by using advantages in industrial territory such as logistics and human resources.

Through foreign consultation, the state launched the City of Knowledge project to build a cluster of institutions for education and vocational training, R&D centers, techno park, residential facilities and hospitals. For this project, the state government proposed four pillars of its regional development policies: R&D + innovation (R&D+I), scientific and technological infrastructure, highly specialized human capital and knowledge culture.

[Figure 3-1] Hidalgo’s Four Pillars of Knowledge-based Development Public Policy

Knowledge-based Development Public Policy

R & D + I

Knowledge HC STI Economy

KC

Source: Secretariat of Economic Development, State of Hidalgo.

According to the plan, the first two stages (2012-15, 2015-18) consist of planning, building basic infrastructure and attracting educational institutions. Hidalgo said the first stage of its policy has been quite successful. With support from the federal government, the state was able to persuade Mexico’s prestigious educational institutions such as National Autonomous University of Mexico (UNAM) and National

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 143 Polytechnic Institute (IPN) to set up campuses in the City of Knowledge. Construction of a third techno-park building was also completed. For the third (2018-24) and fourth (2024-) stages, Hidalgo named the third stage (2018-24) “Consolidation” and the fourth (2024-) “Sustainability” in trying to enhance the context of innovation and business in the city.

[Figure 3-2] Stages of Development: City of Knowledge, State of Hidalgo

Source: Secretariat of Economic Development, State of Hidalgo.

Hidalgo has asked the KSP team for advice on policy about expediting and sustaining the movement of innovation and doing business in a City of Knowledge. The first two stages of the policy were evaluated as successful but mostly for building infrastructure projects, moving educational institutions inside the city and setting a mechanism for adjusting state policies. So this means a lack of real innovation activities and commercial business, or the so-called innovation ecosystem. How this City of Knowledge will increase productivity increase and industrial innovation is in question. In general, building hardware like an R&D center is relatively easier than creating soft and smart power. And the latter takes a longer time, something learned time and time again in Korea’s economic development. For the success of the project, Hidalgo’s expectation of and needs for sustainable innovation and ecosystem are invaluable for regional economic development.

144 • 2014/15 Knowledge Sharing Program with Mexico 2. Korea’s Experience and Approaches toward Hidalgo

Hidalgo submitted a demand survey document for the 2014/15 KSP asking for the appropriate policy for forming an ecosystem of science, technology and innovation in the City of Knowledge. The various sub-topics include R&D, innovation, STI infrastructure, industry-academy relationship, human resources, finance and administration system support, and dealing with them in a relatively short time has been difficult. Fortunately, Hidalgo officials have experience in several projects with global consulting companies and understand the importance of transforming their industrial structure from one based on mining to a knowledge-based economy and the functions of an innovation and business ecosystem. But the key is to find out what to do and how to do to reach the goals as planned. So the KSP team suggested an effective framework for its ecosystem policy and policy priority.

Hidalgo’s City of Knowledge can be defined as an industrial innovation cluster. This project is in the initial stage, but contains all related factors of such a cluster. On the industrial cluster, Korea has extensive experience that is globally recognized. The following is a brief look into Korea’s development trajectory. The country’s economic success in the 1960s and 70s was mainly due to building manufacturing capacity in industrial complexes built and financed by the central government. Export- led economic growth was achieved through this kind of production expansion of manufacturing. The structure of industrial production was transformed to a more high-value industrial chain, but most products remained low value. Experiencing two oil shocks, Korea started to build and enhance its capacity for innovation such as upgrading university research, building state-run R&D institutions and encouraging private research activities. The OECD (2012) described Korea’s technological catch-up and skill development this way:

1) The policies of technological development and innovation were aligned with national efforts to shift output toward more technology-intensive activities.

2) A national R&D program was launched in 1982 to support private investment in R&D. Government R&D spending has rapidly increased since then, while that of the private sector grew exponentially in the 1990s.

3) Continuous upgrading of human capital and skills: In the early catch-up stage from the 1960s to the 70s, the focus was on training low-skilled technicians at vocational schools. As manufacturing was specialized in the heavy and chemical industries, demand for skilled labor increased. The government promoted training in areas deemed a priority for industries such as mechanical, electrical and chemical engineering.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 145 Entering the year of 2000 with slower economic growth, the Korean government adopted a cluster policy that included initiatives such as building the Daedeok Innopolis Special Zone11) for R&D, emphasizing cooperative work among industry, academia, research and the government, and reforming the industrial complex into innovation clusters.

The rapid growth of the Korean economy has been widely studied as a prime model for catching up. Amid the outstanding studies, those by Amsden (1989)12), the World Bank (1993)13) and the OECD (country report) raised the legitimacy of the export-led growth model and industrialization policy. The World Bank report said the success of East Asia’s economic development was due to basic conventional factors for development, not successful industrial policy. In parallel, the report said it could only recommend Korean government policy oriented toward market mechanism, and emphasized the productive institutional capability of government is essential to the effectiveness of policy.

Following these studies, other researches done on the legitimacy and effectiveness of industrial policy urge a cautious approach in implementing government policy in a specific economic environment. The disputes over industrial policy are too diverse, but soft or functional market intervention by the government in a limited area is inevitable because of market failure. Especially, this turbulent era of the global market environment requires a rethinking of the effective role of government policy.

Besides the legitimacy and effectiveness of government intervention and industrial policy, concern has shifted to which kind of industrial policy is valuable in industrial competitiveness. Through this process, the cluster theory was evaluated as a highly effective policy tool for industrial development in developing as well as advanced countries. The concept of industrial innovation cluster was systematically defined by Harvard University professor Michael E. Porter (1990).14) Porter defined the concept of cluster as a dense industrial region with a concentration of interconnected companies and institutions in a particular field, encompassing an array of linked industries and other entities important to competition. Companies in a specific cluster region have cooperative relations for innovation despite being in competition. Jacobs and De Man (1996) said cluster has no standard concept, because since it consists of industrial agglomeration, commonality and complementarities, links and facilitators, the characteristics of each cluster differ due to which factor the

11) See Chapter 6 Launoman & Viitanen, 2011. The Global Best Practice for Managing Innovation Ecosystems and Hubs. Hubconcepts. Helsinki. 12) Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization, New York: Oxford University Press, 1989. 13) World Bank, The East Asian Miracle: Economic Growth and Development, World Bank, 1993. 14) Michael E. Porter, The Competitive Advantage of Nations, New York: Free Press, 1990.

146 • 2014/15 Knowledge Sharing Program with Mexico cluster is mainly dependent on. Hospers and Beugelsdijk (2002)15) said a cluster, which they called geographically concentrated cooperation, is an organizational survival strategy in the intensely competitive business environment. Recent studies like those of Feser and Berman (2000), Enright (1996) and the OECD (1999) emphasized that links and networks among innovation drivers are the core of an industrial cluster rather than regional concentration of companies.

The effect of clusters on competitiveness can be summarized as follows: 1) Geographical concentration and agglomeration effect 2) Specialization and urbanization effect 3) Close network relationship that promotes the exchange of information and knowledge. 4) Innovation-oriented environment and organizational culture

The structure of an industrial cluster consists of the following institutional factors: 1) established companies and SMEs; 2) universities and think tanks; 3) support group in marketing, tax, finance, human resources and government services; and 4) the central and local governments. The most important matter is interactions among these institutions. A cluster’s performance depends on this. Smilor (1989), Lyon (2011) and the OECD (2011) gave prerequisites for a successful cluster. First, forming a good network and partnerships are important for making possible the exchange and sharing of specific knowledge and technological knowhow. These activities provide the spillover effect. Cooperation and collaboration for innovation and business are no less important than financial support and constructions of infrastructure. The second is innovation scope. Starting with the invention of new technology, a series of innovation processes such as commercialization of technology, production, design and marketing, should been done within the same cluster. To get this capacity, supporting institutions should play a key role. The third success factor is the level of technical skills of labor. The fourth is the role of the anchor company. So if no anchor company exists within a specific cluster, cluster policy naturally needs more sources and special efforts to lay the foundation for innovation movement.

Korea is a good example of a country that fully adopted the concept of industrial cluster policy. Around 1990, Korea had established several techno parks and the central government allocated a huge budget for them to initiate industrial innovation and transformation toward a high value-added industry. At the same time, a regional industry cluster was started through an active regional development policy. The institutional framework for regional policy, budget allocation and administrative system was launched nationwide. In Korea, a local government has an authority to designate strategic industries for its area (concept of industrial cluster) with financial support from the central government. And Korea has been pushing

15) Gert-Jan Hospers and Sjoerd Beugelsdijk, 2002.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 147 for the transformation of industrial complexes into innovation clusters. The Ministry of Industry, Trade and Energy has been pouring huge funds into that project, which includes 80-90 mini-clusters.

A new trend of the Korean economy is that to turn into a knowledge economy, the technology-centered focus of industrial and cluster policy must be expanded to incorporate innovation factors. The OECD (2012)16) said that for tackling the challenge of moving toward a knowledge economy, Korea put priority on four policies: 1) development of a new macroeconomic framework to foster private sector development and entrepreneurship; 2) construction of modern IT infrastructure as an enabling environment for productivity gains and spillover into the economy; 3) upgrading of skills and human resource capacity; and 4) strengthening of national and regional innovation systems by promoting continuous investment in new technologies and increasing networks and collaboration for innovation.

Korea is a rare example of an underdeveloped economy emerging into a leading world industrial power. The rapid industrialization process required a pooling of resources, focused investment and proper government policies. Despite eventual success, many mistakes were made and repeated in the development process.17) The Asian financial crisis of 1997–98 was a huge shock to the Korean economy. Productivity and efficiency from industrial innovation policy rose beyond past success. The Mexican state of Hidalgo should draw lessons from the Korean experience. The City of Knowledge project is important in that Hidalgo recognized it as a driver to sustain inclusive and sustainable economic growth over the long term. Policymakers and leaders in Hidalgo are ready to implement all the measures needed to make this project a success. The plan is to not simply ensure existing endowments and capabilities of innovation and business, but also to ease the creation of new industries and companies. What is important now is to bear in mind that countries that successfully catch up learn to combine related policies and endowed capabilities, set priorities and practice ideal policies into reality. So substantial suggestions for the sustainable ecosystem in City of Knowledge are preferred over theoretical approaches. As explained earlier, a country or region in the catch-up process commonly lacks capabilities and knowledge in implementing related policies on innovation clusters. The KSP team must keep in mind the strengths and weaknesses and opportunities and dangers of Hidalgo. Following this doctrine, the main principle of KSP consultation is to suggest the simple direction for implementation and actions of related policies.

16) OECD, 2012. Industrial Policy and Territorial Development, Lessons from Korea. 17) For details, see Kim et al., Success Factors of Innovation Clusters and International Case Studies, KIET Paper, 2014-739.

148 • 2014/15 Knowledge Sharing Program with Mexico 3. Innovation Resources of Hidalgo and Evaluation 3.1. Economy and Industry of Hidalgo

To understand the background of Hidalgo’s request on sustaining the state’s ecosystem, a brief description of the region’s economic situation is needed. In the first quarter of 2013, combined production in Hidalgo reached 207.97 billion pesos (13.51 billion USD), or 1.6 percent of national GDP. The average growth rate in the 2003-13 period was 2.55 percent, below the national average of 2.63 percent over the same period. Since 2011, however, Hidalgo has experienced relatively fast growth, hitting 3.9 percent in the third quarter of 2014, higher than 2.2 percent (same quarter) in 2013.18)

The main driver of Hidalgo’s growth is the service sector (53.5 percent) and industry (42.8 percent), whereas agriculture accounts for just 3.7 percent of the state’s GDP. Per capita income in 2013 was 74,107 pesos (4,800 USD) with an average annual growth rate of 1.2 percent from 2003 to 2013.

[Figure 3-3] Industrial Structure of Hidalgo (2013)

Agriculture sector 4%

Industrial Service sector sector 43% 53%

Source: Secretariat of Economic Development, State of Hidalgo.

18) Secretariat of Economic Development database. Hidalgo in cifras March, 2015.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 149 [Figure 3-4] Employment Structure of Hidalgo (2014)

Primary sector 18% Tertiary Secondary sector sector 56% 26%

Source: Secretariat of Economic Development, State of Hidalgo.

In the fourth quarter of 2014, the economically active population (EAP) of Hidalgo was 1,220,081, of which 1,175,786 were reflected in statistics. Among the employees, more than half worked in the service sector (56 percent), more than a fourth were in the secondary sector (26 percent), and third place went to the primary sector (18 percent).

Over this time, the state government selected strategic industries to focus its support in transforming its industrial structure into one based on more high value-added industries. The selected sectors are divided into 10 categories: agro- industry; metalworking; tourism; construction products; renewable energies; textiles and clothing; logistics; professional services and IT. According to Hidalgo’s official documents, these industries reflect the state’s territorial features as well as development potential.

And Hidalgo is trying to upgrade its innovation capability through the construction of three industrial parks, R&D centers (Atitalaquia, Tula, Tepeji del Río, Tizayuca, La Reforma and Sahagun) and City of Knowledge. All buildings under construction are mostly finished, but substantial context as innovation drivers are under way. On the other hand, Hidalgo tried to increase the number of industrial complexes (industrial parks) in which manufacturers and service companies are concentrated as production clusters. In Korea, industrial complexes were frequently used to make the manufacturing base. With well-connected highways connecting Mexico City to other industrial states and being in the vicinity to Mexico Metropolitan, Hidalgo’s industrial parks and infrastructure have a great advantage. Several global companies such as Cargill Alimentos, Frialsa Logistica and Cerillos La Central have recently selected Hidalgo to establish new branches. The KSP team

150 • 2014/15 Knowledge Sharing Program with Mexico considers this geographical advantage gives Hidalgo the courage to speed up its industrialization, as building innovation capacity exploiting this characteristic will greatly benefit the state.

3.2. Human Resource Capacity

Hidalgo’s population is 2.81 million and accounts for 2.2 percent of the national population, in parallel with the state’s 1.6-percent share of GDP. Despite its relatively small size, the state tries to design educational and vocational programs to improve human resource capacity or job placement for recent graduates. Secondary educational institutes offer industry-related high-tech courses. The Council for Science, Technology and Innovation (CITNOVA) in Hidalgo, a governmental agency, links the activities of the productive sector with higher educational institutions (Manos a la Obra or the “Let’s Go to Work” project).

Breakdown of Hidalgo’s Population (2013)

Population: 2,810,998 (2013) Growth Rate 1980–1990 2.1% 1990–2000 1.7% 2000–2010 1.7% Economically Active Population Total (2.2% of national population) 1,155,062 Employed (2.2%) 1,098,024 Unemployed (2.1%) 57,038 Demographics Men 48.3% Women 51.7% Masculinity Index 93.3 Men / 100 Women Age Structure 0–14 29.1% 15–64 64.1% 65 or older 6.9%

Source: Secretariat of Economic Development, State of Hidalgo.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 151 Hidalgo has a network of public and private technological universities that offer undergraduate, postgraduate and engineering programs with an emphasis on science, technology and innovation. Between 2012 and 2013, 79,331 students were enrolled at 91 higher educational institutions in the state, with 19 percent of the institutions being tech schools. Several prestigious university-level institutions opened branches or second campuses in Hidalgo, which will raise the state’s STI ecosystem.

According to the Mexican Institute for Competitiveness (IMCO), Hidalgo placed 11th in innovation of economic sectors in 2012; the number of patents per million people increased from 0.4 to 4.9 and the number of researchers per 10,000 EAP shot up from 1.9 to 8.7 in 2010. These results were thanks to the state government’s continuous support for boosting human resource capacity and innovation.

In highly educated workers, most researchers in Hidalgo are in engineering. Reviewing the members of the National System of Researchers (SNI) in 2014, 321 researchers were registered, with most of them specializing in engineering areas with 19.94 percent. Just 5.92 percent were medical or health professionals in January 2015. (See table 3-2).

Surveying Hidalgo’s potential in R&D and innovation, certain vocational schools (from high school to university) have established campuses in Hidalgo. Students and graduates of those schools are attractive to businesses and industrial innovation. In retrospect, the Korean economy also provided plenty of skilled workers early in industrialization, and this provided a strong base for manufacturing. Afterwards, R&D activities were gradually but continuously upgraded, and certain industrial cluster policies were also adopted. 19)

Researchers in Hidalgo (2015) 20)

Academic Area No. of Researchers % of Researchers I. Physics, Mathematics & Earth Sciences 44 13.71 II. Biology & Chemistry 61 19.01 III. Medicine & Health 19 5.92 IV. Humanities & Behavioral Sciences 29 9.03 V. Social Studies 49 15.26 VI. Biotechnology & Agricultural Sciences 55 17.13 VII. Engineering 64 19.94 Total 321 100.00

19) Chart created with information of CONACyT and Pro México, Hidalgo, 2015.

152 • 2014/15 Knowledge Sharing Program with Mexico 3.3. Industrial-Academic Cooperation

The state of Hidalgo has implemented measures to support industrial-academic (and government) cooperation, though more communication and advertising activities for the programs are needed. Hidalgo established agencies for such cooperation such as Office for Academic-Business-Government Liaison or Network of Strategic Areas of Knowledge, and CITNOVA plays the role of facilitator and supporter for these institutions. CITNOVA also connects academia, industry and research centers. The state government promotes them to share information and opportunities. RedNova (New Network) is another tool for the state’s cooperation system, a digital platform that aims to raise cooperation and collaboration in science, technology and innovation to strengthen the dissemination and application of scientific knowledge.

Since Hidalgo has experienced relatively rapid growth in the last two to three years and its industrial-academic cooperation activities have a short history and small scale, but the policy direction is well conceived and valuable. Under the national innovation system as well as the regional innovation system, links and active interconnection are invaluable. Korea has had difficulty in promoting these activities. The OECD (1997, 2001)20) also said the EU innovation system has the same problem of related parties being not so cooperative and not so active in exchanging ideas and knowledge. So Hidalgo should put more attention and energy to upgrade this kind of inter-connection in the region because the state lags far behind in manufacturing industrialization and has a short history of innovation policy. Another important point is that educational institutions and certain R&D support centers belong to the Mexican federal government, meaning that a local government can get trapped in difficulty in adjustment and alignment toward efficient innovation activities.

3.4. R&D Expenditures

National expenditures on science, technology and innovation (NESTI) in 2013 represented just 0.75 percent of GDP (121.307 million pesos), and more than half came from the public sector (58 percent). The private sector contributed slightly less than 40 percent and higher education institutions (HEI) were next with three percent. R&D funding sources are as follows (Table 3-3).

20) OECD, National Innovation Systems, Paris: OECD, 1997. Pim Den Hertog and Svend Remoe, Innovative Cluster: Drivers of National Innovation Systems, Paris: OECD, 2001.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 153

National Expenditures on Science & Technology in 2013 (Unit: million pesos) NESTI Activity Gov’t HEI Private % of GDP Total

Investment in 52,592.20 1,222.20 26,482.50 80,297.00 0.50% Experimental Development

Postgraduate 15,160.00 1,649.60 7,221.60 24,031.20 0.15%

Sci-tech Services 1,836.00 855.40 14,009.20 16,700.50 0.10%

Innovation 279.20 0.00 0.00 279.20 0.002%

ICT 69,867.40 3,727.10 47,713.40 121,307.90 0.75%

% Funds 57.59% 3.07% 39.33%

% GDP 0.43% 0.02% 0.30% 0.75%

Source: CONACYT, General Report on the State of Science, Technology and Innovation, 2013.

Federal expenditures on science and technology in Mexico rose from 0.36 percent of GDP 2002 to 0.43 percent in 2013, and the estimate for 2015 is 0.54 percent* (5.68 billion USD), with more than 75 percent in scientific research and technological development.

In the case of Hidalgo, the CITNOVA budget is considered the financial resources for STI and R&D because CITNOVA is the agency responsible for operating public R&D policy in the region.

[Figure 3-5] CITNOVA Budget as % of GDP (2011-14)

0.3

0.2

0.1

0 2011 2012 2013 2014*

Source: CITNOVA, *Based on GDP 2013, 2014.

154 • 2014/15 Knowledge Sharing Program with Mexico 3.5. City of Knowledge Project

As mentioned above, City of Knowledge is one of the industrial innovation zones in Hidalgo as well as an industrial innovation cluster in the state’s drive to form a knowledge-based economy. The general purpose of the zone is to transform and consolidate the Pachuca region as a City of Knowledge and Culture and strengthen scientific knowledge and technological development for regional economic and social development. Politically and economically, this initiative could symbolize a turning point for Hidalgo. Not only the local government but also the Mexican federal government has shown much willingness to make this project successful over the short and medium term.

The policy initiative for City of Knowledge began in 2011. Construction started in 2012, which was drafted under the broad regional development plan, the State Development Plan 2011-16, which aimed for the following objectives:

• Operate and evaluate STI development model • Update and execute public policies toward STI • Promote the relevance and quality of programs related to the education and integration of highly specialized human resources • Strengthen and improve the efficiency of STI infrastructure • Link STI capacity with regional and sectoral strategic industrial areas • Foster the knowledge and application of science and technology within Hidalgo society to improve welfare

[Figure 3-6] City of Knowledge

Source: Secretariat of Economic Development, State of Hidalgo.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 155 3.5.1. Geographical Environment

The state of Hidalgo is bordered by San Luis Potosi to the north, Veracruz to the northeast, Puebla to the east, Tlaxcala to the southeast, Mexico State to the south and southwest, and Querétaro to the west. From the state capital of Pachuca de Soto, it takes 90km to Mexico City, 232km to Tuxpan, 374km to the Gulf of Mexico, 879km to Manzanillo and 1,122km to Laredo, Texas. (Mexico City, Tuxpan, Gulf of Mexico and Manzanillo are Mexico’s main industrial regions.) In addition, the recent construction of the Arco Norte Highway and three other main highways over the last one to three years – the Mexico-Pachuca, Mexico-Tuxpan and NAFTA highways has positioned Hidalgo as an added-value zone in logistics. The state is now the new industrial and services front of the Metropolitan Zone of the Valley of Mexico (MZVM).

The City of Knowledge can use this geographical advantage. Located within the capital Mexico Metropolitan, Hidalgo is on an important industrial corridor. It takes 10 minutes from downtown Pachuca, 90 minutes from Mexico City and two hours from Puebla and Querétaro to arrive at the City of Knowledge, thanks to its connectivity with the neighboring highway network. This geographical advantage has undoubtedly had an impact on the population influx from Mexico City, which could make the regional economy more dynamic.

[Figure 3-7] Highways of Hidalgo

Source: Secretariat of Economic Development, State of Hidalgo.

156 • 2014/15 Knowledge Sharing Program with Mexico 3.5.2. Increase of Educational Capacity

The federal government has astonishingly decided to let three promising vocational universities set up campuses in Hidalgo: the National Autonomous University of Mexico (UNAM), the Autonomous University of the state of Hidalgo (UAEH) and National Polytechnic Institute (IPN). These schools are expected to provide brainpower to strategic industrial areas of Hidalgo through postgraduate and undergraduate degrees as well as two-year technical programs. Their graduates can serve as highly specialized human resources for Hidalgo industry. The state also has an additional 17 institutions of higher learning such as Universidad Politécnica Metropolitana de Hidalgo, Instituto Tecnológico de Monterrey, Campus Hidalgo and or El Colegio del Estado de Hidalgo

A stable supply of skilled workers and upgrading skills are basic factors for industrial development and raising innovation capacity. Vocational institutes strengthen Hidalgo’s competitiveness in attracting business and building the core capability for innovation. Hidalgo officials say their state can reach the stage of knowledge-based economic development. Hidalgo does have a good opportunity for achieving an economic take-off, but to make their hopes a reality, a more critical look is needed at the principle of innovation system and industrial policy.

3.5.3. Strategic Industries and Business Incentives

When the incumbent state administration took over in Hidalgo, it immediately declared and published State Plan for Development 2011-16 (Plan Estatal de Desarrollo para el período 2011-16). Under this plan, Hidalgo aims to consolidate a stable environment favorable toward resident welfare and a generation of positive results in sustainable economic development.

In accordance with this goal and based on its socioeconomic characteristics, the Council of Science, Technology and Innovation for Hidalgo (CITNOVA) has identified ten strategic areas for development:

• Food Biotechnology • Biodiversity • Renewable Energy • Mechatronics • Materials & Metallurgy • Crime Prevention • Information & Communication Technology • Logistics • Health Care

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 157 • Aerospace Industry

Hidalgo offers investors tax incentives and facilities to establish their businesses or industries under an efficient regulatory framework, allowing the easy setup of new businesses.

Incentives offered by each municipality are property taxes, dominium transfer taxes and business licensing fees.

On the other hand, the state also offers the following incentives to those seek to open businesses in Hidalgo:

• Exemption of up to 100 percent of the dominium transfer tax payment, and the right to register in the public registry of property and commerce • Exemption of up to 100 percent of the state duty payment in licenses, permits, land use opinions and environmental impact assessments • Exemption of up to 70 percent in payroll tax payments for each newly created job • Registration of the sales contract, constitutive act and capital gains statement, as well as registration procedures in the public registry of property and commerce as it relates to the company´s settling.

Hidalgo’s business support entities include:

• COINHI: Hidalgo International Corp., better known as COINHI) is a public agency autonomous from Hidalgo’s state government. Its job is assist, support and offer strategic advice to a variety of clients such as businesses interested in exporting products made in Hidalgo. COINHI also helps domestic and foreign investors who want to set up or increase their manufacturing units in the state as well as businesses or institutions interested in benefiting from international cooperation programs, contributing to more employment and strengthening Hidalgo’s economy.

• CITNOVA: The Council on Science, Technology and Innovation of Hidalgo State (CITNOVA) gathers educational institutions, government agencies and the private sector to propose, develop and implement scientific and technological projects developed with alternative energy sources. CITNOVA’s goal is to help Hidalgo become one of the most developed states in this category

• IHCE: The Institute for Competitiveness of Hidalgo State (IHCE) designs, sets

158 • 2014/15 Knowledge Sharing Program with Mexico and coordinates methodologies to propose potential evaluation areas corresponding to subjects whose institutional strengths have a higher immediate impact through lower investments and higher results.

• COFOIN: The Industrial Infrastructure Development Corp. (COFOIN) promotes and establishes contact with entrepreneurs, investors, national and international developers, and the general public to promote investment in Hidalgo in a safe, efficient and reliable manner.

3.6. Interim Evaluation of Innovation Resources and Related Policies

Hidalgo accounts for two to three percent of Mexico’s GDP and population, a small scale for independent and self-reliant development. Moreover, its mining industry cannot serve as the foundation for industrial investment because of the sector’s early decline. So most native Hidago companies are not only small or medium sized, but also in traditional industries. Furthermore, enrollment in Hidalgo remains low. The local government’s financial situation, however, is good enough to invest a lot in innovation infrastructure.

But one invaluable advantage is the willingness to do at the federal level as well at the local level. Policy direction toward becoming a knowledge economy has been well conceived. Especially, the City of Knowledge project can be a good tool for utilizing limited resources. What’s more, Hidalgo has the geographical advantage of being in the vicinity of the Mexico Metropolitan area and accessibility to main highways. So the important matter is to accentuate the state’s strengths while resolving its weaknesses.

Hidalgo has apparently set up a master plan for the City of Knowledge, attracting famous vocational institutes in Mexico and promoting the importance of the project to the Mexican federal government. But its success has been limited in the beginning stage. The next stage demands more complicated adjustment and coordination efforts, financial support and dialogue among people of different levels and areas.

Korea has three policies toward industrial clusters as explained in Chapter 2. Among them, the regional cluster policy toward regional industrial development provides a good lesson for the City of Knowledge. Korea Institute for Industrial Economics Trade (KIET, 2004)21) summarized which aspects of the Korea cluster blueprint within regional development policy could be counted as inefficient and failed. The following four factors were named:

21) KIET, Failure of innovation cluster policies and lessons, 2004.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 159 1) Certain industrial policies deviated from reality such as up-down policies and guidelines from the central government, shortage of absorptive capacity in the designated area and fantasies of the high-tech industry. 2) Failure of linkage and networking. One expectation that could not be automatically realized was that hardware like R&D centers and techno parks could attract the soft power of linkage and collaboration. This demands a lot of efforts in communication and adjustment to achieve efficient innovation. 3) The public and government saw insufficient abilities in areas such as political consideration without reflecting economic reality, failed partnership between the private sector and the government, and inability to coordinate between the local and central government. 4) Non-harmonious policy with other regional industrial policies.

The Korean economy has a world-class manufacturing industry and a developed system of national innovation. But its industrial cluster policy beyond the general policy of expanding R&D and raising innovation capacity has faced difficulty in getting in hand performance of satisfaction.

Considering the next stage of Hidalgo’s City of Knowledge, broad observations of industrial clusters in developing countries must be considered. According to a survey by Ketels et al. (2006),22) advanced economies utilize cluster policy to reinforce or rebuild the innovation system and improve the business environment for the high- tech industry. But in developing economies, cluster policy seeks to boost production and number of experts, as well as build the value chain. Innovation capability has remained relatively neglected. Ketels et al. said common activities in a cluster area are 1) production collaboration; 2) sales collaboration; 3) staff cultivation; 4) survey on market and technology; 5) improvement of business environment; 6) supporting startups; and 7) R&D collaboration. KIET (2014), in a study of many international clusters, suggested that developing economies avoid or illuminate factors hindering success in innovation cluster policy and upgrade innovation orientation. Reciprocal dialogue and interactions within clusters, KIET said, are key factors for success and expand the frontiers of knowledge and information. Industrial clusters are mostly short of absorptive capacity, so collecting institutions related to innovation is deemed easy since interactions among innovation drivers are deficient.

So Hidalgo should learn these lessons from the Korean experience as well as those of other developing countries. And the state should learn to form interconnections among institutional units. The next stage of the City of Knowledge is completely different from the first stage in actions and reactions, policy implementation and relationships.

22) Ketels, C. et al., 2006. Cluster Initiatives in Developing and Transition Economies, Center for Strategy and Competitiveness, Stockholm.

160 • 2014/15 Knowledge Sharing Program with Mexico 4. KSP Consultation for Hidalgo - Process and Contents

The KSP provides policy consultation concentrated on the demands of partner countries. KSP consultants, who have years of experience and expertise, work closely with policymakers and professionals from partner countries. This process is carried out through a series of joint studies, training, advice, meetings of different levels, and if necessary, technical support held alternately in Korea and partner countries. The KSP’s policy consultation offers two programs: one lasting one year and the other lasting three years. The program cycle consists of the four following stages: demand identification, policy research, policy consultation, and monitoring and evaluation.

In the case of Hidalgo, it has participated in the KSP program for three consecutive years, though its suggested consultation topic has differed each year. Each topic has definitely contributed to the development of the state’s innovation system. In 2014, as mentioned in the introduction, Hidalgo’s submitted consultation topic is promoting an innovative ecosystem to enhance scientific, technological and innovative capacities. Hidalgo asked the KSP to focus on the City of Knowledge because that project contains all factors related to innovation and business, and helps the transformation of the Hidalgo economy into one based on knowledge.

4.1. Contents of Research for Consultation

Among its existing industrial (complexes) and techno parks, Hidalgo’s highest priority is the City of Knowledge, as the state government expects it to be the core of the promotion of the knowledge economy. Hidalgo has built the city’s basic infrastructure and aims to invite those with STI capacities to this techno park, such as educational institutions, R&D centers and public entities. As mentioned before, the beginning stage of the project has been successful. All physical infrastructures have been finished, high-level vocational schools have moved in and residential units and hospitals have been built.

The important matter is the lack of a master plan for the operation and management of the park to link these distinct actors and maximize their potential for raising the state’s STI capacities. In 2012-13, Hidalgo had a great vision of allocating related institutes in the area and getting budgetary support from the Mexican federal government. But the next stage demands more detailed operational guidelines for good performance from various dimensions, not from physical hardware.

To prepare the policy for the next stage, it was necessary to find and ensure the state government’s attitude and priority. Though Hidalgo has participated in the KSP

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 161 program for three consecutive years, the submitted consultation topic differed each year; also, this year’s topic is vague and tries to cover all materials in STI capacity. The City of Knowledge should be understood as the concept of an innovation cluster, not just techno parks and R&D centers, because it contains all factors related to innovation cluster as explained before.

To arrive at a conclusion, the Korean research team naturally surveyed the situation and conditions of Hidalgo’s economy and industry in innovation capacity and inter-relationships among academia, business, and R&D centers and techno- parks. KSP consultation was principally oriented to provide policy recommendations for innovation clusters to promote innovation drivers toward aligning limited resources to set up an industrial base in Hidalgo. And the KSP hoped that Hidalgo could find a shortcut from KSP consultation.

4.2. Progress of Consultation

From September 2014 until May 2015, four study visits and final reporting were carried out, twice in each Mexico and Korea and one final reporting in Mexico. In these processes, a delegation from each country exchanged a lot of ideas, observations, discussions and policy-related dialogue. In this context, more concern should be put on the field survey and discussions. Innovation and cluster are difficult concepts that even Korea had difficulty in understanding and disseminating to its domestic companies. Hidalgo officials have well-known ideas and understand the launch of the City of Knowledge, but they acknowled their lack of experience in such complicated work. So seeing and discussing have been the best ways to realize the new concept. To understand the KSP consultation process and contents, a detailed description is provided on visits to both countries and discussion of difficult problems faced by Hidalgo.

In September 2014, the first meeting in Mexico was held as the start of the KSP project of a demand identification and pilot study. In this phase, provisional research topics were selected based on the state's demand identification surveys. Identification of policy priorities was also carried out. In Hidalgo, the visiting Korean delegation was invited to various public and private entities such as the Secretariat of Economic Development (SEDECO), Science, Technology and Innovation Council of Hidalgo (CITNOVA), City of Knowledge in Pachuca (state capital) and the Business Center for Science and Technology in Sahagún (CIATEQ).

Throughout the visits, meetings were held with high-ranking Hidalgo officials, rectors and deans of many higher institutions of learning in Hidalgo, and presidents and directors from the industrial sector. In a presentation held at CITNOVA, Hidalgo’s main focus for its consultation topic, creation of an innovation ecosystem,

162 • 2014/15 Knowledge Sharing Program with Mexico was confirmed to be evaluation of infrastructure and agents involved in science, technology and innovation (STI), identification of links among business, academia and the public sector, and reinforcement of financing sources.

Venues Visited during Pilot Study in Mexico

Visit Period Venue

Secretariat of Economic Development (SEDECO)

Demand Hidalgo Science, Technology and Innovation Council (CITNOVA) Sept. 17-18, Identification 2014 & Pilot Study City of Knowledge

Business Center for Science and Technology (CIATEQ)

A policy demand seminar took place in Korea in November 2014. Two representatives from Hidalgo participated in this visit: the general director of CITNOVA and general director of investment at SEDECO. The main purpose of the seminar was to provide opportunities to KSP counterparts to give presentations that generated in-depth understanding of identified KSP topics, and visit associated organizations to seek ownership and inspiration for KSP.

In a visit to Korea, the Mexican delegation visited various public and private entities such as Cheonan City Hall in South Chungcheong Province, Chungbuk Technopark, Jeju Technopark, Daedeok INNOPOLIS and Electronics and Telecommunications Research Institute (ETRI), University of Science and Technology (UST), Soonchunhyang University (SCH), Korea Gas Corp. (KOGAS) and the Incheon Free Economic Zone (IFEZ). Throughout the visit, the delegation was convinced that a government-academic-industrial link is imperative if techno parks are to properly function as platforms for scientific and technological innovation.

In addition, the Mexican delegation participated in the World Innovation Forum in Daejeon on Nov. 11, 2014, an event organized by UNESCO and the World Technopolis Association. Due to this forum, all delegation members expanded their understanding of the importance of techno park development as innovation-leading platforms not only in the region, but also in the nation and the world.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 163

Venues Visited during Policy Demand Seminar in Korea

Visit Period Venue KDI School: Policy Seminar Daedeok Innopolis Electronics and Telecommunications Research Institute (ETRI) University of Science and Technology (UST) Policy Nov. 10-11, Chungbuk Techno-park Demand 2015 Seminar Cheonan City Hall, South Chungcheong Province Soonchunhyang University (SCH) Korea Gas Corp. (KOGAS) Incheon Free Economic Zone (IFEZ) Jeju Techno-park

After that, the Korean delegation visited Mexico again in January 2015 to conduct additional studies, and went again to SEDECO for a meeting with people related to the governance of the City of Knowledge and CITNOVA to check and discuss the application of previous consultations. In this period, the Korean delegation had the opportunity to visit the industrial park in Tepeji in Hidalgo, where the state’s automotive industry is located.

Venues Visited during Additional Pilot Study in Mexico

Visit Period Venue

Hidalgo Science, Technology and Innovation Council (CITNOVA)

Additional Jan. 21-24, Mineral del Monte (Village in Hidalgo of Mining Origin) Pilot Study 2015 Industrial Park in Tepeji

Ministry of Foreign Affairs

For the Mexican delegation’s second visit to Korea, the visits and programs were designed to reflect Hidalgo’s needs in policy capacity building for startups, SME support and TP management. Three people from Hidalgo visited Korea including the head of the City of Knowledge and CITNOVA, and said they understood the necessity of forming a governance system and the importance of leadership. They attended a lecture hosted by Korea Technology Finance Corp. and Korea Small Business Institute on the Korean mechanism for supporting startups or SMEs with high potential,

164 • 2014/15 Knowledge Sharing Program with Mexico and stopped by the Seoul Startup Center to get policy insights on local government efforts to boost startups. Collaboration among academia, industry and local society remained an important issue so they visited the ERICA campus of Hanyang University in Ansan, Gyeonggi Province, to attend a discussion on the topic and visit the techno park on campus. At Soonchunhyang University, they participated in meetings on management of techno parks and startups. Hyundai Asan Plant and SK Telecom Innovation were cited as examples of gaining advanced technologies through R&D+I projects.

Venues Visited during Interim Reporting & Policy Practitioners' Workshop in Korea

Visit Period Venue

Interim Reporting

Special Lecture hosted by Korea Technology Finance Corp. & Seoul Startup Center Interim Reporting SK Telecom-Innovation April 13-17, & Policy 2015 ERICA Campus of Hanyang University, Ansan Practitioners’ Workshop Hyundai Asan Plant

Soonchunhyang University

Korea Small Business Institute

The 2014/15 KSP policy consultations for Hidalgo have been conducted on the basis of practical goals and made spark activities for businesses supporting innovation in Hidalgo. Hidalgo emphasized the importance of sustainability of its clusters, because the Mexican federal government and local authorities are under pressure from financial limits. They stressed that they cannot follow the Korean model in which the central government provide most of the financing for techno parks and clusters in industrial complex like the Daedeok Special Zone.

The exchange of mutual visits, field studies and Korea’s policy experience most certainly helped Hidalgo to conceive its next-stage policies. From these new perceptions, KSP consultation focused on finding out how to trigger the engine of innovation in the City of Knowledge. KSP consultations have been done in relatively short periods, so it was impossible to cover all matters. But the consultation gave Hidalgo insight and concrete advice for economic development and industrial transformation.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 165 5. Evaluation & Recommendations 5.1. Evaluation of Hidalgo’s Policies

The most notable achievement of Hidalgo's innovation policies is the creation of the City of Knowledge, a geographical agglomeration funded by the federal government. The creation of the state’s innovation ecosystem has been widely recognized as a relatively successful model for rapid industrialization and economic revitalization, taking development trajectory away from the old path. The ecosystem, which is organized primarily in various forms of regional industrial clusters, can combine public interests with private business actions. Under the innovation ecosystem and geographical proximity, efficient and solution-oriented communication is possible and mutual trust and benefit can be developed through open and shared solutions.

Hidalgo has established the basic infrastructure of the City of Knowledge in fostering its innovation ecosystem. The state aims to materialize the government- academia-industry link by transferring and inviting public and private educational institutions such as CITNOVA, the nation's most prestigious universities like UNAM and IPN, and R&D centers. This spatial proximity of innovative actors in the same area corresponds to the basic condition of innovation clusters as defined by Michael Porter et al.

Moreover, Hidalgo has aligned administrative policies related to the STI ecosystem, granting consistency in policy implementation. With commitment and financial support from the federal government, the incumbent government of Hidalgo Gov. Francisco Olvera declared the State Development Plan 2011-16 (Plan Estatal de Desarrollo 2011-16) to embrace STI objectives as part of the macro-vision for the state's economic development. Hidalgo designated a CEO to head the City of Knowledge, so the state clearly understands the importance of innovation hub manager. Furthermore, Hidalgo has strategic target industries in complying with the plan, meaning that the state wants to strengthen its industrial base as soon as possible and fully understands that innovation activities are the cornerstone for the future of industrial competitiveness and economic vitality in Hidalgo.

It has been widely recognized that the regional development of innovation ecosystem brings altogether key innovation actors to perform the relevant technology driven development processes. As is said by Launonem and Viitanen (2011), this kind of recognition is such a strong poof that there is no need to challenge the key role of science, technology and research parks, industrial clusters within the ecosystem. For Hidalgo it is a possible story.

166 • 2014/15 Knowledge Sharing Program with Mexico Launonem and Viitanen (2011), however, emphasized that not all core organizations in every region are uniformly successful, which leaves open the question of how to guide suboptimal regional systems closer to the frontrunner position. Chapter 2 says instances of failure in innovation cluster policy happen from various aspects. Considering that Hidalgo has insufficient industrial assets and value, stimulating and promoting activities among actors is not easy. This is the first essential point for Hidalgo in going to the next stage of policy.

The second viewpoint in evaluation is the rapid rise of an era of value network competition and advantage (Porter, 1985, 1990). Accordingly, innovation and knowledge brokering increasingly occur in open, global and shared settings. Innovation actors are becoming borderless, inter-connected and collaborative among advanced actors. So the future success of an innovation ecosystem is measured in the abilities of innovation actors to connect and manage talent, clusters and practical innovation process in combining the local knowledge base into the global innovation power grid.23) So the global value system is another challenge for the local innovation system and cluster. In the next stage, Hidalgo must consider this new trend in world competition and private sector behavior in innovation.

Considering those two viewpoints, the City of Knowledge first needs to enforce links and interconnectedness among innovation actors. Information is shared and smoothly transferred among innovation actors in the city throughout networking settings. As shown in the following figure, innovation actors like universities, R&D centers and polytechnic authorities do not recognize the need to collaborate with each other, and just focus on their own jobs. Of course, they would naturally stick to advance their own sectors because each institute has to hurriedly build core competence. In the circle of the City of Knowledge, they should exchange information more frequently and sincerely. Sharing even native authority is necessary for the development of innovation activities, agglomeration of buildings and institutions alone cannot produce a spillover effect.

Furthermore, R&D centers, techno parks and universities have no active communication with businesses. Staff of one private company told the KSP team that they had no contact from City of Knowledge authorities. Maybe the federal government-supported R&D institutes have been doing good jobs, but their actions have not rapidly expanded throughout the region. The following diagram illustrates the situation in the City of Knowledge. Even this evaluation, however, admits that the first stage of the policy was successful.

23) See Launonen & Viitanen (2011)

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 167 [Figure 3-8] Lack of Connectedness between City of Knowledge Actors

City of Knowledge B1 Federal Govt. Univ. R&D B2 TP FINANCIAL SUPPORT “NO LINKAGE” B3

State WEAK Govt. Poli LINKAGE tech

Note: B refers to business actors – companies Source: own elaboration.

Moreover, the open and global value network for innovation should be seriously considered as a new trend. Hidalgo has no outstanding industry or business, and without anchor companies and organizations, success is harder to come by in the innovation ecosystem and industrial cluster. Hidalgo is competing domestically and abroad, and global competition for innovation clusters makes Hidalgo more cautious in proceeding with the next stage of its policy.

5.2. Recommendations

The innovation ecosystem and cluster have seen characteristics change because the world economic structure turbulently continues to change and competition among private companies is growing fiercer. The following are aspects of Hidalgo’s City of Knowledge:

1) The City of Knowledge is considered a regional innovation ecosystem and industrial cluster. It includes not only STI-related actors but also private businesses and target industries within Hidalgo. So the ecosystem must be close to the marketplace or market segments, not just knowledge and technology inside universities and labs. 2) The City of Knowledge is still in the first stage of the process, and faces the next stage. The first stage concentrated on inducing and building institutions like universities, R&D centers, techno parks, and business support organizations. 3) The City of Knowledge is facing domestic and global competition to practice

168 • 2014/15 Knowledge Sharing Program with Mexico innovation cluster policy. Hidalgo’s strong points include being in the vicinity of Mexico Metropolitan and major highways, and getting financial support from the federal government. But every local government is trying to attract STI actors to its own territory, resulting in heated competition. 4) Hidalgo has a weak industrial foundation so it lacks anchor companies to foster regional innovation. Despite weak competition, it should open up its innovation platform to a global context.

Korea’s developmental experience undeniably has lessons for policy recommendations for the City of Knowledge. But new recognition must be added. The core elements of the original innovation ecosystem and coordinated ecosystem management must be known. The core orchestrates public-private-academic collaboration in global industrial competition. If a geographical area is confined to a certain region, the ecosystem refers to an innovation cluster system.

Launonen and Viitanen (2011) said every regional innovation ecosystem focuses on accumulating academic knowledge and combining it with market-driven

[Figure 3-9] Innovation Hub Framework

Anchors Company and forum Growth-SMEs driven activities

Start-ups

(Breakthrough to global level Incubation Environments Public-private Living Labs / Test-Beds partnerships

Cluster Policies & Programs

Research & Development Activities

Public-policy Education (elementary to university) driven activities

Physical Infrastructure and Services Structures

National / Regional Innovation Policy Foundation

Source: M.Launonen & Jukka Viitanen (2011) p. 36.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 169 commercialization processes done by the private sector. In most cases, a regional ecosystem is organized around a hub organization that makes all key coordination decisions. The innovation hub itself is also a much wider concept than just a park or coordination office. According to this analysis, the innovation hub consists of multilayers. This framework advocates a multidisciplinary development approach under which all ecosystem elements are planned coherently under one unified regional master plan to seamlessly connect all framework elements to each other.

Looking at Figure 3-9, the structure of a regional ecosystem and industrial cluster and three dimensions of innovation action types can be easily understood. The most difficult challenge in the ecosystem lies in combining parallel interests among the top company and forum-driven activities, the middle public-private partnership and the low public sector-driven activities.

Each element represents a significant development task of its own, but also only in combination can they produce a true ecosystem that rises to global challenges and takes its place in the value network context. So the hub organization, public or private, should be able to plan, organize, manage and further develop the ecosystem. And the hub framework should build on the innovation policy foundation in combining public policy-driven actions with private sector interests. Every ecosystem has a critical management issue of collectively managing various sectorial interests and interfaces.

On Hidalgo’s ecosystem and cluster, the City of Knowledge, urgent matters should clearly be solved so that the city grows as leverage for the state’s economic development. In seeking solutions, what should be stressed is that Hidalgo is relatively a small economy and lacks a sufficient industrial base for making an economic take-off. Coincidently, however, the state has been recognized for implementing the first stage of policy well under the overall plan with federal backup, and wants to emulate the Korean model.

5.2.1. Necessity of Building Holistic Support Mechanism for R&D

For the situation in the City of Knowledge, a strong recommendation is for the state government to first set up a holistic governance system for innovation that would embrace all officials and innovation actors from each level related to the city’s development. The governance system must ensure multilayer meeting like those led by the governor, at the ministerial-level and on a regular basis. These meetings should focus on designing a master plan for promoting a brand value for the city and building an operating system within the city, which is well understood from previous descriptions. In other words, political leadership by high-level officials is crucial for the design of the governance system, and this role should not be limited

170 • 2014/15 Knowledge Sharing Program with Mexico to financial support for construction and R&D funds. Also under this governance system, the federal government's role should not be overlooked given the need for continued financial supports and its evaluation of the progress in the creation of the STI ecosystem in the City of Knowledge. This governance system should build a grand consensus among policymakers to devise coherent policies, debate over narrowing the scope of the target industry area and set the most urgent priority in policy.

The importance of the political and government system is beyond description. But as a reference, one quote is enough. Oh (2006), who had been in charge of Korea’s early industrialization as high-level government official said the following: “In general, lagging developing countries cannot understand and don’t know what to do and how to do. So, whoever should help them.” For a successful industrialization policy, an effective plan is needed with good content and should be gradually ratcheted up. Government officials need to integrate all related factors and trigger and use all tools and means to achieve the targets.” What’s more, Oh said, lagging developing countries need strong leadership from the central government and should ensure great impact on the results.24)

In the beginning, successful industrialization needs a lot of macroeconomic and micro policies.25) Hidalgo is in the beginning stage of development of more manufacturers. The ecosystem and industrial cluster it has pursued is too complicated to persuade and coordinate each interest group. Top leadership is essential for strongly backing up various meetings, communication, adjustment, platform creation and problem solving for financial, organizational, and behavioral matters.

One policy example shows the need for top leadership and an efficient governance system. Hidalgo has participated in the KSP program for three consecutive years with a different subject each year: techno park policies (first year), industrial policies (second) and the City of Knowledge (third). Though these subjects might have an association, they still are independent concepts and the level of difficulty required to seek a solution for fulfilling the policy demand varies. So the suggestion is to build a regional innovation system that Hidalgo identifies and clarifies as the main target of its policies in a coherent.

A more pragmatic matter is the governance system. In general, the communication process has multilayered channels. Each innovation actor wants to be the top decision maker and expects the relationship with Hidalgo to develop into a more productive one. But if the governance system is unclear or excludes top government officials, innovation actors lose their ways to approach the government and their dialogue can be neither productive nor efficient.

24) Oh Won Chul, 2006. Challenge and Han River Miracle, Korea. 25) See World Bank (1993).

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 171 At the start of the KSP consultation, Hidalgo said it was ready to discuss all policy issues and coordinate problems for the City of Knowledge. But after KSP continued its discussions and shared the complicated process of regional innovation, the state moved to establish a governor-led governance system. Productive policies and communications are expected across ministries and across the public and private sectors. Hidalgo has had no experience in running a ministerial committee. So in the next stage of the City of Knowledge, Hidalgo must learn to manage the committee for innovation activities.

5.2.2. Industrial Targets

Hidalgo has little industrial foundation for manufacturing production and weak base for an innovation cluster. Attraction of commercial investment is the most important task. With a weak industrial base, getting an R&D and innovation foundation is tough. Many industrial cluster studies and explanations for an innovation ecosystem say policy alignment and a public-private partnership are important. So industrialization, ecosystem and cluster should be considered together for stimulating innovation and expanding the industrial base of Hidalgo.

First, Hidalgo must narrow down and focus on urgent priority areas in strategic industries. Weak innovation assets and economic behavior limits Hidalgo in pursuing its industrial policy. And a few number of target industries should be set given their low innovation capacity.

Second, the differing characteristics of industries undoubtedly demand different policies and strategies in the use of local government resources. So, Hidalgo should survey what policy is needed for each target industry. For example, the state’s ten strategic areas can be categorized in two: traditional and new industries. Hidalgo must discuss what tools and policies need to be implemented through forums, seminars and committees in which all actors in R&D, business, education and government administration participate. This is simply a matter of setting urgent priority among a few selected areas.

The previous chapter mentioned that actors are so complicated and that integration of such actions and interest is important. But such studies are mostly lacking in what must be done in lagging developing countries. Industrial and innovation targets could both are aligned at the same time because of scarce resources, insufficient experience and cultural aspects.

Third, according to the category of the target industry, policy priority can differ. Hidalgo’s traditional industries have experienced gradual innovation over time, while new industries lack in a base and accumulation of knowledge and technology. So

172 • 2014/15 Knowledge Sharing Program with Mexico when the government seeks to develop traditional industries, it has to solely focus on designing key leverage policies that support existing companies in innovation and industrial cluster. When the government wants to develop new industries, it has to remember to attract companies from other domestic regions or, if necessary or possible, from other countries (FDI) as well. This policy should be followed in parallel with innovation policy in the same industrial sector. So which new industry and which company’s investment should be sought? To find the solution, sector- specific innovation capability should be raised. Figure 3-10 presents an image of this suggestion. Industrial policy and the City of Knowledge as an ecosystem and industrial cluster are aligned together. The dimension of this two-policy sector is different from the one techno-park policy.

[Figure 3-10] Types of Policies

Level of Difficulties Industrial Policy TP Policy VS

City of Knowledge

Industry - University - Business Relationship

R&D Lab. Construction Management Innovation Sustainability

Source: own elaboration.

5.2.3. Promoting Communication with IT Network

The holistic governance system of the City of Knowledge should obviously design and implement detailed policies for the ecosystem and industrial cluster under a long-term vision and guarantee coherency with its policies. What’s more important, however, is keeping all actors within the city connected. To communicate and integrate each actor’s behavior, IT technology is one of the optimal ways such as a fiber-optic cable network. The importance of communication and the latter’s flow is crucial for Hidalgo, no matter what category of strategic industry it aims to develop. With this connectedness through IT (Internet), public administrators, businesses and academia can be updated with each other’s information in real time, and can

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 173 eventually elevate the related knowledge and skills to utilize computer and online skills.

For reference, the success of Korea’s Daedeok Innopolis was due largely to the aforementioned fiber-optic cable network as it facilitated the flow of information and stimulated communication among all actors within the techno park. What is mandatory is to listen to the voice of those in the field and secure a grand consensus to design and implement public policies. Korean telecommunication companies have experience in the installation of such a network, and their experience could help Hidalgo vis-a-vis the City of Knowledge.

5.2.4. Continuous Upgrading of Human Resources

Finally, Hidalgo should take a closer look to define its available resources to promote. It has sufficient resources to promote its innovation ecosystem and industrial cluster like the City of Knowledge, 17 institutions of higher learning around the state, public and private R&D centers and excellent connectivity with the Mexican capital. To accelerate the speed of the innovation process, however, these resources must be integrated and the basic capacities of innovation and R&D should be enhanced. Particularly, taking full advantage of vocational education programs and facilities should be deemed the most urgent and promising solution for regional development.

The biggest strength of Hidalgo’s STI potential is its educational and vocational capacities. Within the City of Knowledge, Mexico’s most prestigious institutions of higher learning and their labs are to be located, as well as the state’s most important university. Also Hidalgo is home to many vocational programs and technical centers, and its proximity to the nation’s capital Mexico City should also be highlighted.

Yet to utilize and take advantage of this strength to boost innovation capacity, the key is to integrate these educational and vocational capacities with innovation resources as well as manufacturing education for skilled workers so that they can advance basic technological R&D per the demands of business and industry. As mentioned above, an incentive system is needed to woo actors to participate in the collaboration between academia and industry. For example, invited educational and vocational institutions within the City of Knowledge should design educational curriculum that meet the needs of industry to eventually provide skilled workers as well as basic level researchers in the near future.

As the Financial Times wrote in a recent article (“Mexico sets itself a vocational challenge” by Jude Webber on Feb. 9, 2015), the talent shortage is acute across Latin America, according to a survey last year by Manpower Group. Mexico’s two decades

174 • 2014/15 Knowledge Sharing Program with Mexico of disappointing productivity and the huge opportunities borne from its historic energy reform mean training staff with the right technical skills is especially urgent, and such skills open up huge opportunities for workers, according to the article.

But to guarantee sustainable development of the region in innovation and continuous agglomeration of target industries, skilled workers should be encouraged to keep upgrading their knowledge and skills through continuous education until they can conduct their own research in laboratories, for instance. The best example of this is the U.S., where the government mainly focused on promoting high-tech manufacturing to revitalize employment. Originally, the policy was implemented for improving manufacturer access to the world market via installing institutes for manufacturing innovation via the promotion of government-academy-industry partnership in a U.S.-based regional cluster dedicated to high-tech manufacturing.

In conclusion, Hidalgo has succeeded in the first phase of its innovation policy (City of Knowledge), but must put different priorities on each objective of its industrial and innovation policies to concentrate more on identifying and integrating its limited resources. In the previous chapter, the innovation ecosystem and industrial cluster were fully surveyed and discussed. And the finding was that physical infrastructure automatically guarantees success in industrial innovation and economic dynamics. Considering these facts, Hidalgo’s vision for the City of Knowledge can most certainly be achieved soon if the state secures a grand consensus among actors who participate in the project under a holistic governance system for designing more target-focused policies and a master plan for coordination and alignment. The experience of Korean economy, which has been studied numerous times by international institutes and researchers, could contribute to Hidalgo’s economic development through the early success of the City of Knowledge.

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 175 References

Amsden, Alice H. 1989. Asia’s Next Giant: South Korea and Late Industrialization. New York: Oxford University Press Council in Hidalgo for Science, Technology and Innovation (CITNOVA): http://citnova.hidalgo.gob.mx, retrieved 8.2.2015 Council in Hidalgo for Science, Technology and Innovation (CITNOVA), 『Áreas Estratégicas Hidalgo』 2013. (in Spanish) Electronics and Telecommunications Research Institute (ETRI): https://www.etri.re.kr, retrieved 8.2.2015 Financial Times, “Mexico sets itself a vocational challenge,” published 9.2.2015. KIAT (Korea Institute for Advancement of Technology), KIAT Industrial Technology Policy Brief, Vol. 23, 2014. KIAT (Korea Institute for Advancement of Technology), KIAT Industrial Technology Policy Brief, Vol. 24, 2014. KIET (Kim et al.), 2014. Success factors of innovation cluster and international cases study. KIET Paper 2014-739 Martti Launonen & Jukka Viitanen (2011), The global best practice for managing innovation ecosystems and hubs, Hubconcepts Inc., Helsinki Mexican Geological Service (SGM, Servicio Geológico Mexicano): http://portalweb.sgm.gob.mx/economia/en/mexico-mining/352-hidalgo.html, retrieved 6.2.2015 Mexican Geological Service (SGM, Servicio Geológico Mexicano), PANORAMA MINERO DEL ESTADO DE HIDALGO. 2013. (in Spanish) http://www.sgm.gob.mx/pdfs/HIDALGO.pdf OECD, 1997, National Innovation System. OECD Paris. OECD, 2001, Innovative Cluster: Drivers of National Innovation Systems. OECD Paris. OECD Center for Development, 『Industrial Policy and Territorial Development - Lessons from Korea』 2012 Oh Won Chul (2006) Challenge and Miracle on the Han River, Korea Presentation Material of CITNOVA, Innovation in Action, 2014. Presentation Material of CITNOVA, Hidalgo Industrial Infrastructure, 2014. Presentation Material of the City of Knowledge, City of Knowledge & Culture, 2014. Presentation Material of the Secretariat of Economic Development (SEDECO), STI Hidalgo

176 • 2014/15 Knowledge Sharing Program with Mexico Ecosystem, 2015. Marshall, A. (1920). Principles of Economics: An Introductory Volume Macmillan and Company. Belussi, F., & Caldari, K. (2009) At the Origin of the Industrial District: Alfred Marshall and the Cambridge School. Cambridge Journal of Economics, 33(2), 335-355. Porter, Michael E. Clusters and the new economics of competition. Vol. 76. No. 6. Boston: Harvard Business Review, 1998. Development Center Studies, Industrial Policy and Territorial Development, Lessons From Korea, OECD Development Center, 2012 2010 Modularization of Korea’s Development Experience: R&D and Technical Education, 2011, Korea Development Institute Korea Report Dissemination Seminar at World Bank, Korea as a Knowledge Economy – Lessons Learned and Challenges Ahead – Dec. 13, 2007, Joonghae Suh Breschi, Stefano, and Franco Malerba, eds. Clusters, Networks and Innovation. Oxford University Press, 2005. World Bank, 1993. The East Asian Miracle: Economic Growth and Development. The World Bank

Chapter 3 _ Fostering Hidalgo’s Transformation into Knowledge-Based Economy via Improved R&D Potential by Promoting ‘City of Knowledge’ as Integrated Ecosystem of State’s Scientific, Technological and Innovative (STI) Capacities • 177

2014/15 Knowledge Sharing Program with Mexico: Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy Chapter 4

Suggestions for Establishing a Think Tank for VET and Lifelong Education

1. Introduction 2. Mexican VET and Challenges 3. VET Research Functions in Mexico 4. Functions, Establishment Background, and Development Process of KRIVET 5. Pilot Plan and Conclusion ■ Chapter 04

Suggestions for Establishing a Think Tank for VET and Lifelong Education

Eunsang Cho (Korea Research Institute for Vocational Education and Training)

Summary

Mexico has experienced poor economic growth, low productivity and unemployment due to problems such as workers not meeting the skill demands of the labor market, high dropout rates in school, outdated training programs, and facilities and equipment that fail to meet industrial demand. Productivity and economic growth are expected to benefit from the establishment of a Mexican VET think tank. For this purpose, this study will review Mexico’s VET, major VET and related research functions, and challenges. Also examined will be KRIVET, which was established when a pressing need arose for a new VET framework after the 1997 Asian financial crisis. The Korean think tank’s emergence, development process, output and organization will be explored given its contribution to Korea’s economic and productivity growth, through consistent analysis and support for Korea’s VET policies and institutions. Finally, this chapter suggests a pilot plan to establish a “Mexican VET Research Institute.”

1. Introduction

Over the last 30 years, Mexico has underperformed in economic growth, mainly because of sluggish total factor productivity. Such productivity fell from 100 percent in 1990 to 91.8 percent in 2011, showing an average annual decline of 0.39 percentage points over the 21-year period. From 2005 to 2012, Mexico’s productivity

180 • 2014/15 Knowledge Sharing Program with Mexico increased by 0.55 percent. While the productivity of big companies with more than 500 workers increased by 5.8 percent, that of small companies with fewer than 11 workers decreased by 6.5 percent (IDB, 2014). Mexico’s labor productivity is relatively low compared to those of the U.S. and Asian countries. According to the OECD, Mexico’s labor productivity increased by 7.9 percent from 2000 to 2012, a minor increase given the rise of 58.1 percent in Korea, 25.1 percent in the U.S. and the OECD average of 19.7 percent. Mexico’s low labor productivity can be explained by the low productivity of its workers. GDP is low compared to employment. The low productivity of small companies is apparently due to stagnant worker skills. Mexico ranked 55 out of 148 countries in the 2013 Global Competitiveness Index of the World Economic Forum. Unemployment has been falling since rising in the wake of the global economic crisis of 2008-09. Youth unemployment, however, has been around 7 percent since 2009, and unemployment for women is 4.5 percent. Due to the decline of migration to the U.S., unemployment in Mexico rose to 4.6 percent in 2013 (INEGI, 2013).

The Mexican labor market is characterized by a sharp contrast between two economies. The first is modern and export-oriented with technology and high productivity, accounting for under 40 percent of overall employment and responsible for 75 percent of GDP. The second, however, is a traditional and informal economy with low wages and stagnant productivity, and accounts for around 60 percent of overall employment and just 25 percent of GDP (STPS, 2014). More than half of the Mexican workforce (58 percent, 28.7 million) works in the informal economy (INEGI, 2014).

In Mexico, the Ministry of Education is responsible for vocational education and training and qualifications, while the Ministry of Labor is responsible for employment information and vocational training. Research (Cho et al., forthcoming) shows problems such as a gap between labor market demands and the skills developed,26) in part due to weak cooperation between industrial and education institutions, high drop-out rates in school, low satisfaction with education due to lack of teacher capabilities, outdated facilities and equipment, the tendency of vocational school graduates to enter college, and vocational training programs that fail to meet industrial demand. Research functions spread across institutions are limited, as their main focus is curriculum development, teacher training and development of standards to a large extent. So there is a need for a VET think tank to study a number of problems and issues on the labor market, vocational education and training, career guidance, national HRD, and policy evaluation and monitoring and suggest policy recommendations for the Mexican government. The establishment of a Mexican VET think tank is expected to help identify problems, analyze their

26) Refer to OECD (2009). Such comments were often observed in discussions with business trainers, policymakers, school and college staff, and union leaders in visits to Mexico from 2012-14.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 181 causes, present solutions, and evaluate and monitor policy options in vocational school reform, vocational education and training, career guidance, school-industry collaboration, school-to-work transition and job creation.27)

This chapter will briefly explain the background of KRIVET’s setup in Korea. Before the 1997 Asian financial crisis, the Korean Ministry of Education had focused vocational education on schools such as vocational high schools, technical colleges and tech universities. The Ministry of Labor concentrated on vocational training centers for workers, polytechnic universities that taught skills and technology, and national standards that recognized these skills. The division between vocational education in school and vocational training on site caused inefficiency, as vocational training at the Ministry of Labor was not linked to degrees recognized by the Ministry of Education. Likewise, vocational education provided by schools was separate from practical qualifications or standards required at work. As the government realized the need to link education and the labor market, the two ministries established Korea Research Institute for Vocational Education and Training (KRIVET) to study public policy for support of vocational education and training.

Therefore, establishing a Mexican think tank for vocational education and training like KRIVET can enhance the quality and efficiency of VET as required by industry and contribute to Mexico’s industrial development.

This chapter will discuss VET and related institutions in Mexico and suggest potential research projects that a Mexican VET research institute can perform to improve each institution. Then will come a look at the foundation, development and achievements of KRIVET. Finally, a pilot plan with four scenarios for the establishment of Mexican VET research institute will be presented.

2. Mexican VET and Challenges 2.1. Introduction of Mexican VET

The Secretariat of Public Education (SEP) and the Secretariat of Labor and Social Provision (STPS) are both in charge of VET in Mexico. SEP is responsible for vocational education at high schools and universities and initial vocational training such as CONALEP, DGETI, DGETA, DGECyTM, Technological Institutes, Technological

27) Aside from socioeconomic background, the real motive of discussion for establishment of the Mexican VET institute was as follows. Policy suggestions including “an establishment of Mexican KRIVET” were presented at the KSP Dissemination Seminar in 2013 in Mexico City. For more details, refer to Cho and Kim (2013). Then an MOU was concluded between KRIVET and the Federal Ministry of Education in Mexico in 2013. Responding to a request from the ministry, the KDI started to implement a major KSP project that included “an establishment of Mexican KRIVET” from 2014.

182 • 2014/15 Knowledge Sharing Program with Mexico Universities and Polytechnic Universities (IDB, 2014).

STPS is mainly responsible for training for vocational transition as part of employment service, such as on-the-job training or training for the unemployed. The Ministry of Economic Development (SE) is in charge of training at SMEs for Mexican VET.

Companies, unions, employer organizations and private training institutions play critical roles in training, standardization, industry-school collaboration and other areas. For example, OJT for active workers is mostly organized by employers’ associations or unions without government support (OECD, 2009). Vocational training from STPS under the BECATE program28) offers training opportunities for the unemployed or workers looking for better jobs, though most beneficiaries are youths with no job experience (STPS, 2014 a, b).

[Figure 4-1] Skills Development System: Key Agencies

Ministry of Economic SEP STPS Development (SE)

Basic education Training for jobseekers and Training for SMEs Upper secondary education unemployed • CONALEP Training for active workers • DGETI, DGETA, DGECyTM

Higher education Enterprises Unions • Technological Institutes • Technological Universities • Polytechnic Universities OJT Training

Public training centers Employer Private training organizations providers

Source: Inter-American Development Bank, Mexican Labor Market and Vocational Education and Training System, Labor Market and Social Security Unit, 2014.

28) The BECATE program is implemented in partnership with companies. The following criteria are needed to receive a state training subsidy: 1) design and submission of a training proposal; 2) agreement and signing a training agreement with the employment center; 3) provision of training materials, equipment, trainers, accident insurance and basic health insurance for trainees; and 4) possession of a number of vacancies equal to or higher to the number of trainees requested. Trainees receive training through-one to three months of employment by a company. Usually, training courses cover 384 hours (48 hours per week). See STPS (2014) for more details.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 183 The Mexican system of vocational educational has two levels: high school and university. High school can be divided into vocational and general, and further divided into technical baccalaureate and technical professional baccalaureate.

Vocational high schools are operated by the Ministry of Education, State Government, and Federal Union, and the technical baccalaureate and technical professional baccalaureate are provided. Centralized units of upper secondary education are under the secretariat of the Ministry of Education (SEP) in Mexico. Each operates vocational high schools (IDB, 2014). First, DGETI (Director General for Industrial Technological Education) is an administrative unit for CETIS and CBTIS. Second, DGETA (Director General for Agriculture and Livestock Education) is for CBTA and CBTF. Third, DGECyTM (Director General for Sea Science and Technology Education) is for CETMAR and CETAC (IDB, 2014; SEP, 2014b). Vocational schools are all related to each industrial area. DGETI is the biggest in controlling 456 technical high schools and 642,627 students. DGETA has 284 schools, and DGECyTM 39. More than 1.3 million students have enrolled in these vocational subsystems, which represent about 33 percent of enrollment in upper secondary vocational education. These institutions are related to specific industries and operated through relations with industries (IDB, 2014; SEP, 2014b).

Decentralized units of state government manage vocational high schools with federal participation, and DGETI (Director General for Industrial Technological Education) governs CECyTE. DGETI operates CECyTE as a technological baccalaureate and CONALEP (National Technical and Professional School) as a technical professional baccalaureate.

Higher-level vocational education takes place in four-year tech universities and two to three-year technical institutes such as technological institutes and polytechnic universities. These higher-level institutes design their educational programs according to the needs of the industry.

General Direction of Training Centers for Work (DGCFT) under SEP provides initial training through the federal Training Centers for Industrial Work (CECATI). State governments provide vocational training through Institutes of Training for Work (ICAT).

184 • 2014/15 Knowledge Sharing Program with Mexico 2.2. Major VET Institutions

2.2.1. CBTIS29)

CBTIS is one of Vocational High Schools in Mexico (SEP, 2014). CBTIS 227 was first opened in 2013 and designated the first support center for start-ups (Centro Emprendedor). Four of five start-up projects were implemented. Students have said these programs help them acquire necessary skills and qualifications to begin start- ups, and they can test themselves based on what they learned in school. CBTIS has strong links with the state government, domestic companies, and industries. As a result, they have high employment. Yet many fail to complete the program, which suggests that educational efficiency has to be improved.

The biggest challenge of CBTIS is the high dropout rate of around 40 percent. To take on this challenge, in-depth research on CBTIS across the country should be performed. SEP, however, has no organization to do this. In the interview with the author, CBTIS staff, including the principal, said it would be helpful to create a think tank like KRIVET in Mexico.

2.2.2. CONALEP30)

CONALEP is one of the best types of vocational high school in Mexico (SEP, 2014), and has the best curriculum for vocational education. It was created as a decentralized body with its own legal personality and assets. CONALEP has the mandate to provide professional technical education and prepare young people to become technicians at the upper-secondary education level to satisfy the demand for skilled labor, as well as technical upper-secondary education for those who wish to advance to post-secondary education. CASTs (Technological Assistance and Services Center) are bodies within the CONALEP system created as an alternative to productive sector requirements. They aim to support productive chains and enhance the quality of services by providing (i) technical assistance; (ii) training; and (iii) evaluation and skills standards certification. Mexico has eight CASTs (Cho et al., forthcoming; SEP, 2014).

The strength of CONALEP is that its educational service, school-industry collaboration and school management are better than those of other vocational high schools. It has also earned public trust by being acknowledged by various institutions. The certificate that students acquire when they graduate helps them to get employment.

29) Written based on the interview (September 18) during demand survey. 30) Written based on the interview (September 17) during demand survey.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 185 The issues of vocational high schools are as follows.31) First, the link between industry and schools is rather weak to meet the demands of the labor market. Second, the dropout rate is high for various reasons. Third, satisfaction with education is low due to the lack of teacher capabilities.32) Fourth, facilities and equipment need to be expanded and updated. Fifth, more students from vocational schools want to go to college rather than enter the labor market. Complementary policies should be implemented to provide labor market information and career paths of technical and vocational skills so that students and parents can have a clear picture of career or vocational track.

More improvement is needed, however, in education infrastructure, online education for students and teachers, and the general perception of vocational high schools. As CONALEP’s purpose is helping students get employed in specific industries, student training programs have to be upgraded. Also important is a communication channel on needs for jobs.

After interviewing the authority, principal and teaching staff of CONALEP, the following possible areas for research on CONALEP are recommended. First, research on school-industry collaboration in CONALEP should ascertain the needs of industries and find ways for teachers to experience their respective industries. Second, research is needed on helping students enter the labor market. Third, analysis should be done on why the registration rate is low and how to raise it. Fourth, development of a system that can project job supply and demand is recommended. To predict demand, it is important to systemize a statistical survey of graduates. Although institutions have crucial information, it is scattered so comprehensive analysis is needed. Lastly, research can be done on how a teacher can teach him or herself information technology.

2.2.3. CECATI33)

Unlike in Korea, Mexico’s two government departments are in charge of vocational training. Initial training or training for vocational education and part of OJT are under the jurisdiction of SEP. Additional OJT and training for change of vocation, which is relevant to employment service, are provided by STPS.

The Directorate General for Training for Work (DGCFT) under SEP provides training through Training Centers for Industrial Work (CECATI) at the federal level and Training and Work Institutes (ICAT) at the state level. Federal training institutions

31) The challenges are pending issues. Refer to OECD (2009) Learning for Jobs and Cho et al (forthcoming) for more details. 32) This is discussed in OECD (2009) as well. 33) Written based on the interview (September 18) during demand survey.

186 • 2014/15 Knowledge Sharing Program with Mexico are fully funded by the federal government, and ICATs are equally funded by the federal and state governments and, in certain states, depend on STPS (OECD, 2009).

CECATI is funded by the federal and state governments. Under DGETI, the school only provides vocational training programs. Overall, 199 CECATIs provide 58 training courses.

The strengths of CECATI are its fast-track courses that lead directly to employment and flexible courses that allow students to continue learning without attending class. CECATI’s courses are considered to be high quality, and registration fees are relatively low. Improvement is needed, however, in student attitude and skills, facilities, teaching materials, and lastly, professionalism of the teaching staff.

In Korea, certain vocational training institutes were upgraded into technical colleges or polytechnic universities, and others were made to specialize in ICT. In this context, a Mexican VET think tank could provide long-term strategies for CECATI, which is tailored to meet Mexico’s specific needs.

2.2.4. Polytechnic University34)

In Mexico, tertiary education institutes are technological universities, technological institute and polytechnic universities. Tertiary vocational institutions identify the needs of industries to develop and operate curriculum. In the case of a technical university, one third of the curriculum is field training and the employment rate is rather high at 82.5 percent (Cho et al, forthcoming).

The model system of Mexican polytechnic universities began in 1991 for the purpose of meeting industry’s needs.

Beginning with three, the number of polytechnic universities eventually increased to 100. Sustainability, flexibility, quality of education, multi-purpose, sensibility and focused education are the main characteristics of the model. Polytechnic universities have industrial collaboration among its fundamentals.

The dual education system is the most important factor in the polytechnic university project, which aims to teach practical knowledge through competition and learning in a company. Participants in this program work and study at the same time, which means that they learn in the field. But few students participate in school- industry collaboration35) In this context, the opportunity for such collaboration, such

34) Written based on the interview at Valle de Toluca Polytechnic University and Tecamac Polytechnic University (September 18) during demand survey. 35) At Tecamac Polytechnic University in the State of Mexico, only 70 students out of 6,000 took part in

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 187 as dual education system, should be expanded to include more students. Research to design and execute the most efficient collaboration of this sort and conduct an evaluation is needed.

Vocational education and training in Mexico have two main challenges. First is a lack of mechanism to link VET to labor market demand. Second is a lack of a system to provide a good workforce in the labor market through VET.36)

3. VET Research Functions in Mexico

The following organizations perform research functions under SEP: COSDAC operates a skills education system in secondary and high-level education; CONOCER is a standards authorization institution in charge of links among firms but has a weak connection due to little legal foundation among standards-setting institutions and schools; and CIDFORT performs research under DGFPT.

3.1. COSDAC

COSDAC, under SEP, aims to improve the quality of educational programs in middle and high schools. Its 34 employees provide teacher training for students 15- 18 years of age. They also research not only vocational schools but also general secondary and high schools. They are responsible for capacity building of youth and conduct teacher training. COSDAC also develops educational programs and standards for teacher training with INEE, CNSPC and CONOCER.

Its major research areas are development of common educational programs and the teacher training system. Future research areas include job creation for the elderly, policy development for NEET (Not in Education, Employment or Training), projecting supply and demand for those between ages 15 and 18, analysis of educational and training environments, development and evaluation of the application of common education programs, and evaluation of the teacher training system.

The Mexican government is investing a lot of resources for the sake of 1) making sure that young people and workers contribute to national growth with enhanced capacity and 2) putting education at the center of public policy so it can contribute to national development. With job creation, however, many difficulties are noted. For example, 30 percent of those between ages 15 and 18 are NEETs. So the government’s ultimate purpose is to reinforce youth’s capacity and link education and the labor market. SEP aims to improve investment and productivity by fundamentally

the dual education system. 36) Written based on the interview with SEP (September 18) during demand survey.

188 • 2014/15 Knowledge Sharing Program with Mexico [Figure 4-2] VET Research Functions in Mexico

• Job creation for the young • Policy development Institution for the NEET • Training teachers with technological • Supply and expertise demand projection for youths between • Teacher 15 and 18 Functions training • Environment assessment • Curriculum • Teacher development training • Enhancing vocational • Development and training evaluation of common curriculum COSDAC CNAD

• Development and evaluation of teacher training system VET Research Function in Mexico • Supply and demand projection • Curriculum of future jobs develop- ment for CONOCER DGEPT / the NEET • Standards CIDFORT • Curriculum authorization development

• Development of • Task standards • Evaluation of analysis qualification / competi- tiveness standards curriculum development

• Assessment of competitiveness standards of strategic industries

Future research demands

changing the quality of education, and COSDAC is investing US$3 million of yearly budget in this. For example, SEP since 2008 has reviewed the provision of MCC (Macro Curricula Common), a framework of basic knowledge a student should acquire through upper secondary education, to technical and general high schools through “the secondary school comprehension plan.” The aim is to overcome too much focus on the curriculum itself.

Meanwhile, Mexico’s teacher training system is experiencing drastic change, as students should receive knowledge in a fast-changing world. SEP is establishing a teacher training platform for secondary-level teacher training. The Internet-based platform aims to build a network of all teachers for education on training, lectures and specialized knowledge.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 189 Investment and productivity can be enhanced by improving the quality of education, but cooperation between the public and private sectors to assess secondary education is needed to better understand the connection between education and productivity. These research demands strongly point to the need for a think tank like KRIVET.

3.2. CONOCER

CONOCER is a national council for standardization and certification under SEP. The council has set 450 standards in areas related to the economy, management, agriculture, trade, business, education and business plans. The council was formed in the process of disseminating certificates. After its foundation, civilian or public companies and universities became part of the service providers. This can be divided broadly into the standards council and service providers.

CONOCER has 120 members and a budget of US$8 million. It serves as a link between SEP and STPS; more specifically, it is closely related to CONALEP and the needs of businesses. Although it stopped functioning from 2005 to 2007, it has constantly developed its qualification system with the growing importance of school- industry collaboration and standard system.

The council is composed of the government (education on education, labor, economy, tourism, energy, finance and adults), the private sector (business representatives provide consulting in councils for trade service and tourism), and labor (labor union, workers, workers’ association). The Secretary of Education serves as the chair and the undersecretary is the deputy chair.

Main research areas include job demand, development of task standards and establishment of competitiveness standards for strategic industries such as energy, information technology and tourism. Future research areas include predicting job supply and demand, analysis of task standards demanded by industry and evaluation of the competitiveness standards in strategic industries.

3.3. DGFPT and CIDFORT

DGFPT has more than 50 years of history as an employment training center. As a subsidiary to SEP, the center has the purpose of contributing to national development by training human resources to enhance productivity. It provides a competency acknowledgement system to train workers who can enter the labor market. It also provides education to groups including the retired, elderly, unemployed, disabled and students. Participants can choose between 30 hour-long short-term courses and 600 hour-long professional courses, both of which are priced economically.

190 • 2014/15 Knowledge Sharing Program with Mexico For example, it has established around 2,000 training facilities nationwide in collaboration with the federal and state governments.

The proposed research areas include reinvention of school-industry collaboration, links between industry and VET institutes, evaluation of the human resource development system and development of qualification standards needed by industry.

CIDFORT, a SEP subsidiary, is in charge of research. With 70 employees and 35 researchers including professors, CIDFORT has an annual budget of around US$70,000, which is used to train teachers and principals, develop curriculum for online education and maintain competitiveness standards on four employment- related. Areas of research are demand for executive plans for education reform by DGFT, reorganization of curriculum development of 2014 and demand for teacher training. Further research can include development of education and training courses for NEETs and development and evaluation of curricula. Although CIDFORT has been recently criticized as losing its role as an independent think tank, it has been trying to re-establish its role as a research institution.

3.4. DGETI and CNAD

DGETI aims to instill students with competence, knowledge, and skills who can contribute to the labor market and society in general. A combination of 611,000 students and 217,000 teachers are registered in 486 DGETI institutions.

In 2014–2015, the body is adopting methods of holding teachers’ meetings, strengthening teacher capacity, professionalization programs, methods of raising a principal’s competency and a dual education system specialized for Mexico. The aim is trying to introduce such programs to 30 institutions, or around 6.5 percent of its schools.

The following strategy seeks to enhance student capacity. First, Inverse Learning means doing homework at school and learning theories of other knowledge at home. Students study tasks given to them by teachers. A combined 207,000 students have been newly enrolled, and 4,937 teachers are being trained for them. Next is project-based education. Teachers encourage students to find solutions on their own in a group by asking questions Teacher training being done by teachers is a major characteristic of project-based teaching.

DGETI’s main research areas are technology related. The purpose is to strengthen knowledge in physics, mathematics, biology, chemistry, health, knowledge and management, as well as helping teachers develop their own areas of specialization.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 191 Two CNADs are in Latin America and the Caribbean, in Brazil and Mexico. The Mexican CNAD was established in 1997 after a technological agreement in 1994, and aims to enhance teacher capacity in mechatronics and the plastic industries. CNAD trains teachers by having them apply their knowledge and producing tangible results. While DGETI focuses on training teaching capacity, CNAD concentrates on providing professional vocational training for teachers so that they can be professionals in their areas.

3.5. PROFORHCOM

PROFORHCOM is a skills-based HRD program, 30 percent of which is funded by the Mexican government and 70 percent by Inter-American Development Bank and the World Bank. Its main lines of actions are SNC National Skills System – CONOCER, Mexican Certificate Framework – job skills standards (CECATI) and cooperation between the education and productive sectors.

As an HR training program, PROFORHCOM collaborates with CONOCER. Project management and coordination are the former’s main tasks and conducted by 22 staff. Its annual budget is US$2 million, and it is in its third stage (2014-2019).

The first step is scholarship, dual system and professional scholarship. The second step is M&E on RIEMs, scholarship and a professional program for teacher development. This program is evaluated with product outcome and resource and impact output.

According to the interview, the main significance of this project is that COSDAC took a coordinative role for the first time for Mexico. Moreover, the project enabled the industry to collect information and monitor and evaluate the program.

The strengths of this program are availability of scholarships (2011-2013), low risk and guaranteed transparency. Its weakness is complexity, as it is managed according to international politics and domestic standards while being huge in scale.

3.6. Evaluating Research Capacity and Deriving Research Needs37)

Research capacity for VET under SEP can be summarized as follows. First, research capacity for curriculum development seems well-rounded, and DGEPT and CIDFORT can perform this function for different objects. Second, research capacity for teacher training has been accumulated over a long time, and COSDAC and CNAD

37) Based on the interview with VET experts during a visit to Mexico in January 2015.

192 • 2014/15 Knowledge Sharing Program with Mexico have research data for different objects. Third, CONOCER has research capacity for standards endorsement, and competitiveness standards are being developed in collaboration with related institutions.

In sum, the Ministry of Education in Mexico has a few research functions related to curriculum development and qualifications, but no functions in labor economics, career guidance, national HRD, the informal sector, social economy, evaluation and public policy. These explain the weak availability and use of data for policymaking purposes and informing stakeholders of policy options. No centralized research functions involve policymakers, experts, practitioners and employers, whereby policy suggestions could be systematically relayed to policymakers. In this vein, the need for a Mexican VET Research Institute is shown.

Also, meetings with related institutions resulted in a number of VET-related research demands38). First and foremost, research is needed on educational reform,39) particularly in vocational education, school-industry collaboration and school-to- work transition, and also needed is an execution plan and long-term strategy, reorganization of curriculum development and development of a common curriculum. Second, topics for teacher training-related research could include teacher meeting method, capacity enhancement, specialization programs, particularly in IT, capacity enhancement programs for principals, and specialized dual education programs in Mexico. Third, research topics on qualifications can include development of task and competitiveness standards for strategic industries such as energy, IT and tourism. Fourth, analysis of school supply and industrial demand at the school level is also highly in demand as a research area.

But future research demands drawn from interviews with a number of stakeholders are much more diverse and specified. First, research topics on youth can be job creation for youth, policy development for youth NEETs, supply and demand projections for future jobs and youth between ages 15 and 18. The second research area includes analysis of education and training environments and projection of supply and demand of future jobs and strategic industries. Third, research topics on evaluation can include development of common curricula and evaluation of its application, evaluation of VET-related institutions and programs, and policy evaluation. Fourth, as to research related to school-industry collaboration, improving such a collaboration system, plans for linking school and industry, evaluation of the HRD system and development of standards that meet industry’s needs can be studied.

38) Based on the interview with VET experts during visit to Mexico in January 2015. 39) High dropout rates at CBTIS and low registration rates at CONALEP are urgent research agenda per interviews with CBTIS and CONALEP during 2013-15 Mexico visit.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 193 Research is needed in the following areas as a priority if a Mexican VET think tank is established: 1), research on the link between qualification and vocational education and training; 2) entrepreneurial education or business startup system; 3) teacher training or an innovation system and 4) evaluation of the dual education system.

Certain overlapping research functions such as curriculum development and teacher training are little cause for worry in case of integration of research functions into a Mexican VET think tank because the objects of curriculum development and teacher training differ dramatically. What matters is a new and inter-disciplinary approach for critical research areas such as VET, labor economics, career guidance, national HRD, the informal sector, social economy, evaluation and public policy.

4. Functions, Establishment Background, and Development Process of KRIVET

For Mexico to set up its own VET think tank as a benchmark, KRIVET will be explained in more detail. In this chapter, the functions, foundational basis, and achievements of Korea’s KRIVET will be explained.

4.1. Functions

KRIVET is a national policy think tank in VET that supports national policy for links between the VET and labor markets. As the best national think tank for the purpose of supporting jobs for all Koreans and competent workers, KRIVET has functions in the following seven areas: VET policies, job creation, employment and VET, vocational education, career education, qualification system, and international cooperation.40) KRIVET’s organizational structure as of 2014 was as follows:

40) KRIVET. 15 Years of KRIVET and Its Challenges. 2012. P. 9.

194 • 2014/15 Knowledge Sharing Program with Mexico [Figure 4-3] Organization of KRIVET

President Auditor

Research Advisory Committee Office of Audits

Vice President

Division for Research Coordination

Division for Creative Strategy Center for Performance Management

Center for HR (Human Resources) Policies Division for Research in Future Center for Qualifications and NQF HR (Human Resources (National Qualifications Framework) and Qualification) Center for Private Qualifications

Lifelong Vocational Education Center

Career Development Center Division for Research in Lifelong Vocational and Career Education Center for Meister Schools

Center for Free Semester and Career Experience Program

Center for skills Development Policies and Evaluation

Division for Research in Center for Trend and Data Analysis Employment and Skills Evaluation Center for Quality Assurance of Work-Learning Linkage System

Division for Management Support

Center for NCS Curriculum Development and Implementation

Center for Global Cooperation

Source: KRIVET (http://eng.krivet.re.kr/eu/ea/prg_euAEADs.jsp)

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 195 4.2. Establishment

4.2.1. Foundational Basis

KRIVET was founded in 1997 in the wake of increased need for a think tank to support policies for human resource development for the knowledge-based and infinitely competitive world; assist in developing the population's lifelong technical and vocational skills for social and labor market changes, such as aging; help restructuring of the TVET system to reflect changes and needs of industry and the labor market; and execute integrated policy research on strengthening school- industry collaboration, adopting an integrated approach to TVET, and boosting links between educational degrees and skills.41)

KRIVET was opened on October 18, 1997, as a policy think tank based on the Korea Research Institute for Vocational Education and Training Act, which was legislated and enacted in February of the same year. According to the law, KRIVET’s aim was to “research and develop VET policies and qualification systems, develop and disseminate VET programs to activate VET and enhance vocational skills of the people.42)”

4.2.2. Establishment Procedures

In February 1996, the Presidential Commission for Education Reform suggested the establishment of KRIVET, emphasizing the need for comprehensive reform of VET to secure human resources for national development and international competition.43) The commission said KRIVET should secure the professionalism and independence of VET policies and maintain consistency in related policies while continuing government investment in human resource development.44)”

KRIVET would be co-operated by the Ministry of Education and Ministry of Labor to conduct research and projects to solve the problems stemming from lack of cooperation between education and the labor market. It would support government policies to transform Korea from a degree-based society to one oriented toward skills.45)

Under the Law on the Establishment and Management of Government-funded Research Institutions legislated on January 29, KRIVET has been under the Prime

41) Ibid. 42) KRIVET, Establishment of KRIVET and Its Main Functions, 2002, pp. 6-7. 43) KRIVET, 10 Years of KRIVET, 2007, p. 39. 44) Ibid. 45) Ibid.

196 • 2014/15 Knowledge Sharing Program with Mexico Minister’s Office.46)

4.2.3. 3 VET-related Acts and KRIVET

The three VET-related laws are the Korea Research Institute for Vocational Education and Training Act, Vocational Education and Training Promotion Act and Framework Act on Qualifications. Under the first of the three laws, KRIVET’s purpose should be to research and develop VET policies, collect, manage and disseminate VET- related information and materials, develop and disseminate VET programs, research nationalization of private qualifications and evaluate and certify VET institutions and programs.47)

The Vocational Education and Training Promotion Act stipulates that KRIVET i) support the government's establishment of the Basic Plan for VET every five years, ii) assist in the operation of the deliberation committee for VET policies under the prime minister and consultative committees on vocational education and training under local government heads, iii) accredit VET providers and release the results, iv) collect and provide VET-related information and v) perform related research projects and operations.48)

The Framework Act on Qualifications prescribes the institute’s job as follows: support the establishment of new national qualifications; provide assistance to work related to authorization of private qualifications; devise measures to make qualifications and educational background compatible; support operation of a system of basic competence required for every job; and carry out research projects on measures for international recognition of Korean certificates.49)

The three VET-related laws gave KRIVET the following main functions: 1) investigation and development, 2) evaluation and accreditation, 3) production, collection and dissemination of information and 4) policy support. Based on these functions, KRIVET would carry out i) R&D of VET-related policy, ii) collection, management and dissemination of VET information and data, iii) development and dissemination of VET programs, iv) R&D of policy on the qualification system, v) review, study and research national authorization of private qualifications, vi) accreditation of VET providers and authorization of VET program accreditation, and vii) other related works.50)

46) Ibid. 47) Ibid., p. 40. 48) Ibid. 49) Ibid. 50) Ibid., p. 41.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 197 KRIVET later evolved to perform the following tasks: conduct research and projects on national development of human resources, study lifelong learning and schools and VET for adults, conduct research and projects on national and private qualifications, develop and disseminate VET programs, evaluate VET institutions and programs, conduct research and projects on e-Learning, provide career information and guidance to the people, release information on national human resource development and VET, conduct research and projects on international VET, and perform international exchange of information.51)

4.3. Development Process

The development process of KRIVET can be divided into five periods. The first was between 1997 and 2000, when KRIVET helped develop a new paradigm for VET. Its main achievements were creation of an institution specializing in VET in 1997 and hosting the UNESCO Regional Center in the Asia-Pacific region. The next period was between 2000 and 2003, when KRIVET opened the era for HRD. Over this period, KRIVET was designated an HRD center by the Ministry of Education in 2003, built NHRD-Net, and received designation as the second UNESCO Regional Center of Excellence in Technical Vocational Education & Training. The third period was between 2003 and 2006. While leading the specification of national HR policies, KRIVET conducted research and built up massive panel information to provide solutions for social agenda. It also developed the National Competency Standards to serve as an R&D institute connecting schools, education offices and the central government. In the fourth period of 2006 to 2011, KRIVET played a leading role in VET policy issues. It organized the Global HR Forum, the world’s first international HR forum, tried to develop and promote the Korean model for Meister high schools and executed a workshop for policymakers from UNESCO member countries. In the final period from 2011 to now, KRIVET has been leading HR policy research planning and conducting research on job creation, skills development in preparation for a future high–skilled society and a virtuous cycle of work, education, training and qualifications.52)

51) KRIVET, Establishment of KRIVET and Its Main Functions, 2002, p. 7. 52) KRIVET, 15 Years of KRIVET and Its Challenges, 2012, pp.3-13.

198 • 2014/15 Knowledge Sharing Program with Mexico [Figure 4-4] Development Process of KRIVET

Period 1997~2000 2000~2003 2003~2006 2006~2011 2011~ VET, challenge and Leading specification Leading linkage Achievements development of the Coming of an era of national HR Dominating VET between VET and new paradigm for HRD policies policy issues employment

• Birth of a dedicated • Designated as a • Built massive panel • Published around • Executed strategic institute for national HRD center by the data and conducted 1,000 report in 10 yrs. leadership in HR VET (1997) Ministry of Education macro-level projects policy research (2003). to provide solution • Hosted Global HR development • Led the establishment for national issues. Forum, the first of the ‘Basic Plan for • Built a comprehensive international HR • Focusing on job VET’ in 1999. information system • Researched military forum (Nov. 2006) creation for the for national HRD, HRD. national economy • Conducted research called NHRD-Net. • Supported policy • Focusing on VET to reform the system • Served as an R&D development to development for for secondary and • Researched on institute linking schools, solve the challenges high school-level future high-skilled regional HRD policies local education offices, of “job creation and society. vocational education. and the implementa- and the central govt. skills development for tion strategy. the vulnerable groups,” • Focusing on vocational • Creation of Career Major events • Achievements in education supporting Information Center, work-study-skills CareerNET • Published the first emphasizing • Supported ed. of Future Career enhancing national development and combination. • Hosted a UNESCO World. competitiveness, distribution of the • Focusing on Life-long Regional Center in expanding VET, and Korean model for Vocational education the Asian Pacific • More active improving inequality Meister High Schools. region (1999) research on quality • Focusing on control of the • Developed and applied • Held workshop for qualifications system • Provided a stepping qualifications market the National Compe- relevant policy makers supporting virtuous stone for overcoming tency Standards. from UNESCO cycle of work- massive layout disaster • Designated as the member countries. education-training- during the Asian 2nd UNESCO • Supported qualification. financial crisis by Regional Center of Kazakhstan’s national • Focusing on inter- improving national Excellence in TVET qualifications system VET system. (2000). (2006). national cooperation

Source: KRIVET, 15 Years of KRIVET and Challenges, 2012.

4.3.1. VET and New Paradigm’s Challenge and Development (1997–2000)53)

In the early years of KRIVET, its research challenged the institute to achieve pioneering success in its unique areas of vocational education, educational programs, qualifications, vocational training and career path. As a new paradigm was needed in the transition from an industry-based society to a knowledge-based one to strengthen the link between education and the labor market, KRIVET actively led the establishment of the Basic Plan for VET in 1999. As a result, the Basic Plan for National Human Resource Development in 2001 provided transitional momentum that later precluded the plan’s legislation.

Over this period, many studies were performed to reform the system for secondary and high school-level vocational education. At the time, vocational high schools were looking for a transition to secure competitiveness in vocational high school education. As a result, KRIVET suggested a national policy to allow easier foundation of small specialized high schools, which offered a new prospect in vocational education.

53) Ibid. pp. 3-4.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 199 Moreover, a stronger support system for an effective qualification system was proposed. Based on the Framework Act on Qualifications promulgated in 1997, KRIVET provided the foundation to manage the quality of private qualifications and secure public funds for the project to nationally certify private qualifications, a process that began in March 2000.

In the career area, the Ministry of Education opened a career information center within KRIVET in 1999 to promote lifelong learning and support personal career development. On December 27, 1999, the website CareerNet opened to support self- directed career development of youth, providing a platform to share career guidance contents accumulated through research. In international cooperation, the think tank hosted a UNESCO Regional Center in the Asia-Pacific region in November 1999 to develop into an international mecca for VET R&D.

4.3.2. Coming of HRD Era (2000–2003)54)

KRIVET expanded the VET concept into that of national human resource development in the 21st century. Since then, it has conducted research and projects from a more comprehensive perspective of supporting national human resources policies. This was to supplement the not-so-close links between education and the labor system. In May 2003, KRIVET was designated a human resources development center by the Ministry of Education based on the Human Resource Development Basic Act.55)

In 2000, KRIVET released research results for building and managing NHRD-Net, a comprehensive information system for national human resource development to collect, analyze, manage and use information on policy issues.

In qualifications, research was conducted to emphasize the comprehensive, on- site and useful factors of qualifications to strengthen their positive effects. For this purpose, the institute tried to build and manage a way to create a qualification system to best meet the needs of the industry. The research results were reflected in the Revised Decree for National Skills and Qualifications Law and the Basic Act of Qualifications Standards. Additionally, research to support the quality of the qualification market to activate private qualification market started to hit its stride.

Also growing were internationally cooperative research and projects to learn from case studies of foreign policies and share lessons with the world through co- research with the OECD, UNESCO, NCVER from Australia and CIVTE from China. In 2000, KRIVET was designated the second UNESCO Regional Center of Excellence in

54) Ibid. pp. 4-6. 55) Refer to HRD Basic Act (2004.1.7).

200 • 2014/15 Knowledge Sharing Program with Mexico Technical Vocational Education & Training (i.e., URC in TVET).

4.3.3. Leading Specifications of National HR Policies (2003–2006)56)

When the Roh Moo-hyun administration began in 2003, Korea’s HR policies focused on “educational reform and realization of a country with a strong knowledge-based culture.” To build a skills-based society, major policies were needed for training professionals in core industries, building an HR development system, strengthening the link between supply and demand of human resources, activating the effective use of vulnerable groups including women and developing a Korean HRD Index. To provide solutions for these problems, KRIVET’s HRD Support Center started to carry out major research, build big panel data,57) and collect and analyze HR-related statistics.

In VET, through a report to the president for the “Reform of VET policies” in 2005, KRIVET emphasized the need to enhance national competitiveness and fairness to expand VET opportunities through relevant research; it succeeded in using its research in supporting documents for the Five Year Plan for Lifelong VET (2007–2011).

In vocational education, KRIVET signed an MOU with the Korean Army to develop a new research area in military HRD. In career research, KRIVET has been constantly updating the contents and organization of CareerNet, a comprehensive career information network that supports students toward self-motivated career development, to respond to the needs of teachers, education offices, schools and students.

In qualification, the National Competency Standards Project was started in 2003 to develop national competency standards, build infrastructure and develop models for its application, and continue research to promote private qualifications. Projects to share Korea’s knowledge in school management, curriculum and textbook development and its development experience were launched through international cooperative research and projects. Examples include projects to build Kazakhstan’s national standards system in September 2006 and UNESCO Better Education for Africa’s Rise in 2013-2015.

4.3.4. Dominating VET Policy Issues (2006-2011)58)

In 2007, KRIVET celebrated its 10th anniversary. Over its first decade, it had established itself as a hub for HRD, publishing around 1,000 reports. Based on such

56) KRIVET, 15 Years of KRIVET and Its Challenges, 2012, pp. 6-7. 57) Refer to www.krivet.re.kr for more details. 58) KRIVET, 15 Years of KRIVET and Its Challenges, 2012, pp. 7-9.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 201 achievements, it hosted the Global HR Forum,59) the world’s first international HR forum, in November 2006. Such efforts confirmed that HRD is not just a national issue but a global one, and training globally competitive HR is at the core of Korea’s national policies. Now an annual event, the forum has grown to be an occasion to share policy trends and issues for HRD in a global era.

In VET, KRIVET supported policy development to solve the challenges of “job creation and skills development of vulnerable groups” from 2007. This effort was later connected to the first Five-year Plan for Lifelong VET (2007–2011). The focus was expanded from out-of-school youths and the jobless to employed workers, unemployed college graduates, middle-aged people and women. KRIVET has been leading the policy effort for VET to include the entire work-life and provided as a universal right to everyone.

In July 2008, the Plan for Korean Meister High Schools was devised to overcome an identity crisis in vocational education. A support center for Meister high schools60) was established by KRIVET, which helped the development, distribution and expansion of more than 30 such schools by 2005.

4.4. Research Achievements and Influences

shows KRIVET’s R&D budget from 1998 until September 2012. The amount started at KRW 3.1 billion in 1998 and grew more than nine times to KRW 27.5 billion in September 2012. The think tank has published 2,540 research papers over the same period. Research at KRIVET can be categorized into basic and consigned research. Basic research is initiated by an individual researcher and processed through a standard research procedure at KRIVET, and then supported by funds from KRIVET. Consigned research is requested and funded by an external institution such as the Ministry of Education, Ministry of Labor or another organization to meet their own research demands.

This chapter will analyze KRIVET’s achievements in its seven main sectors of interest: VET policies, job creation, employment and skills development, vocational education, career education, qualifications system and international cooperation61).

59) Refer to www.ghrforum.org for more details. 60) Refer to www.krivet.re.kr for more details. 61) For the major background of research and policy suggestions, refer to 4.5.2.

202 • 2014/15 Knowledge Sharing Program with Mexico [Figure 4-5] KRIVET Research Budget (Unit: KRW, Exchange rate: 1 USD=1,100 KRW)

30,000 27,465

25,000

20,000

15,000

10,000

5,000 3,117

0 1998 2000 2002 2004 2006 2008 2010 2012.9

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 19.

4.4.1. VET Policies

Since KRIVET’s establishment in 1997, the VET policy sector has been closely related to national HRD policies. In line with the Basic Act for National Human Resource Development legislated in 2002, KRIVET has supported the establishment and growth of national HRD policies and their transition. The Center for HR Policies implements the results of research and projects that helps the transition from school to the labor market between VET and the labor market. Its main research subject is the link between VET and the labor market. More specifically, the following table describes in detail areas covered by the Center for HR Policies.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 203

Areas Covered by Center for HR Policies

Areas Extent of Coverage

National HR Policies National HR policies Basic plans, laws, national HR policies

Links among Devising KRIVET’s strategic Devising KRIVET’s strategic research employment-VET- research areas areas qualification system

Employment & labor Analysis of HR-related Labor market analysis, analysis of VET- market analysis environment/situation related environment/situation

Quantitative information Employment, prospect, statistics, Prospect & analysis of infrastructure database employment supply/ demand by industry Qualitative information Skills demand, skills mismatch, future infrastructure skills

Higher education, knowledge-based Policies on new & service, science higher education, green growth, HR Training future HR information service, science technology training & use HR, HR development in strategic industries

Management of Globalization, changes in population & university specialization technology, reunification of South and support center to Adjust to environment North Korea, strategic issues in climate reinforce higher change education

Women, elderly, North Korean refugees, Policies on specialized Social integration multiculturalism, development of HR policies specialized HR policies

Regular VET, youth, re-training, school- Regular VET industry collaboration, reflection of Others industrial needs

Others International cooperation, others

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 24.

The Center for HR Policies studies strategic planning, infrastructure and strategic HR training. To look at the budget spent on each area in the 15-year period from 1997 to 2012, 74 projects were conducted in strategic planning for KRW 6.6 billion; 100 projects in infrastructure for KRW 13.3 billion; and 71 projects in strategic HR training for KRW 3.8 billion.

204 • 2014/15 Knowledge Sharing Program with Mexico

Projects Conducted by Center for HR Policies by Topic (Unit: number of projects) Research vs. Basic vs. Consigned Projects Research areas Total Basic Consigned Research Projects

National HR policies 25 48 41 32 73 Strategic planning KRIVET strategic planning 1 0 1 0 1

HR policy-related environment; current 16 16 11 21 32 analysis

Infrastructure Infrastructure for 19 36 44 11 55 quantitative information

Infrastructure for 6 7 8 5 13 quantitative information

HR for future 21 14 34 1 35 Strategic HR training Response 22 14 32 4 36

Social integration 14 19 33 0 33 General VET Generic vocational 11 10 19 2 21 education and training

Others Others 15 14 13 16 29

Total 150 178 236 92 328

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 26.

To compare the number of projects conducted in 2007 and 2011 by topic, 24 percent of all projects were conducted in strategic HR training in 2007 and 20 percent was conducted in strategic planning. In 2011, however, 38 percent of all projects were conducted in strategic planning, and infrastructure came next with 22 percent.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 205 [Figure 4-6] Comparison of Number of Projects Conducted by Center for HR Policies by Area in 2007 and 2011

2007 2011 Others Strategic Planning Others 20% 20% 16% Strategic General VET 11% 38% Planning 20% 16% 13% General VET 24% Infrastructure 22%

Strategic HR Training Strategic HR Training

Infrastructure

Source: KRIVET, 15 Years of KRIVET and Its Challenges, KRIVET, 2012, p. 24.

[Figure 4-7] Comparison of Center for HR Policies’ Budget Spent by Area in 2007 and 2011

2007 2011

Others General VET Others Strategic Planning General VET Strategic Planning 8% 8% 8% 5% 12% Strategic 6% 49% HR Training 27% 29% Strategic 48% HR Training

Infrastructure Infrastructure

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 27.

In budget, 49 percent of the budget was spent on strategic planning in 2007, while 29 percent went to infrastructure. In 2011, 48 percent was spent on infrastructure while strategic HR training received 27 percent.

4.4.2. Job Creation

Over the past 17 years, the job creation sector has built various panel information and basic statistical infrastructure to support the transition from school to the labor market. Based on such information, efforts have gone toward efficiently supporting job creation in Korea based on more analytical and thoroughly factual research.

206 • 2014/15 Knowledge Sharing Program with Mexico Starting with a strong emphasis on employment after high school, plans in 2011 were made to establish comprehensive strategies for job creation while analyzing job trends of the times. For this purpose, KRIVET issued the bi-monthly publication THE HRD Review and bi-weekly KRIVET Issue Brief, and tried to disseminate and expand these publications to experts from all areas of society. While HRD policies focus on research that draw long-term and systematic national HR training, the job creation sector sets up government policies to respond to current issues in a timely fashion.

The following are projects executed in the job creation sector. Among the topics of job currents, statistical infrastructure, labor supply and payment, the transition from school to the labor market was the most popular. The second most popular topic was labor supply. Numerous studies were done on job creation for vulnerable groups, and this effort contributed to providing policy alternatives for them. Also, job analysis is strength of KRIVET. Though little research has been done on statistical infrastructure, clear achievements have been seen proportional to the financial resources allocated to the topic. Statistical infrastructure and various panel information is KRIVET’s strength, but more comprehensive research is needed.

illustrates in detail the number of projects conducted by the job creation sector.

Projects Conducted in Job Creation Sector by Area (Unit: number of projects) Research area Basic Consigned Research Project Total

Job currents 2 0 2 0 2

Statistical infrastructure 14 5 7 12 19

Labor Supply and demand 9 35 42 2 44

Job analysis 12 18 19 11 30

STW 38 24 50 12 62

Vulnerable groups 11 26 35 2 37

Policy evaluation 2 12 13 1 14

Companies 5 4 9 0 9

Comprehensive strategies 2 1 3 0 3

Others 2 1 2 1 3

Total 97 126 182 41 223

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 32.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 207 4.4.3. Employment and Skills Development

Employment and skills development has shown the R&D accomplishment of leading national VET systems by supporting the setup of the first Basic Plan for Lifelong VET (2007-2011). Since 2011, it has conducted research and projects in different areas such as eliminating blind spots of training opportunities, running unemployment training based on employers’ needs and enhancing efficiency of project execution systems. This accomplishment is actively reflected in the establishment of the second Basic Plan for Lifelong VET (2012-2016).

Before KRIVET, VET-related R&D had been conducted mostly by think tanks at Korea University of Technology and Education and the Human Resources Development Service of Korea. Since its birth, KRIVET has been studying employment and VET-related topics and conducting projects. The Center for Skills Development Policies and Center for Skills Development Evaluation are in charge of projects on the topic.

Over the past 17 years, the major research topics of employment and skills development have been employment (including labor market and job supply and demand), overall skills development, companies and workers, the unemployed, vulnerable groups (elderly, women, North Korean defectors and expats), youth infrastructure (counseling, employment service, task analysis, instructors, jobs and other supporting projects), and evaluation. Evaluation is the most popular topic, followed by companies and workers and employment.

Research Conducted on Employment and Skills Development Sector by Area (Unit: No. of studies) Research areas Basic Consigned Research Project Total Employment1) 48 47 91 4 95 Overall skills development 40 35 71 4 75 Companies and workers 51 51 99 3 102 Unemployed 14 30 38 6 44 Vulnerable groups2) 50 64 101 13 114 Young people 11 4 15 0 15 Infrastructure3) 64 84 133 15 148 Evaluation 14 100 40 74 114 Total 292 415 588 119 707

Note: 1) Labor market & job supply and demand 2) Elderly, women, North Korean defectors and expats 3) Counseling, employment service, task analysis, lecturers, job, other supporting projects Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 36.

208 • 2014/15 Knowledge Sharing Program with Mexico In budget, KRW 16 billion has been allocated to basic projects, while KRW 42 billion has gone to consigned projects.

4.4.4. Vocational Education

Vocation education, one of the bigger pillars in education, has played many roles in Korea’s transition from a degree-based society to one oriented toward skills. KRIVET, the country’s lone think tank to research vocational training at schools, has been conducting studies and projects in secondary and higher-level vocational education. Recently, the institute has led intensive research and projects on the government’s vocational education policies and schools through the recently opened Center for Meister Schools and Center for Better Vocational Education.

Since 2011, KRIVET has sought to establish a culture of employment after high school, successful management of specialized (Meister) high schools and revamping overall conditions for society, education and culture so that high school graduates can seek jobs first and then proceed to higher education. Forty-four Meister schools have been selected to provide a curriculum adjusted to industrial needs, a proven successful model for a secondary-level VET system.

Over the past 15 years, the vocational education sector has conducted research at the following levels: secondary (specialized or Meister schools), higher (junior colleges or universities), adult and level for all. Generally speaking, the area with the highest number of studies was research and program development at the secondary level of vocational education, accounting for 69 percent of all projects conducted. Second was the level for all at 19 percent, which had no distinguished topic. Research on higher (7 percent) and adult-level vocational education (5 percent) remained relatively few in number.

[Figure 4-8] Project Distribution in Vocational Education Sector

Level-for-all Adult Level 5% 19%

Higher Level 7% Secondary Level 69%

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 42.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 209 To look at the distribution of research objects and topics, most are concentrated in secondary-level education. Evaluation was most heavily conducted at the higher level, however, given focused evaluation of institutions and projects by junior colleges.

Project Objects and Number of Projects Conducted by Area (Unit: No. of Projects) Research area Secondary Higher Adult For all Total Textbook 6 0 0 0 6 Basic research 60 9 8 38 115 Others 1 0 0 3 4 Alternatives 60 10 9 18 97 Training 4 1 0 1 6 Material development 10 0 0 1 11 Support 65 0 3 9 77 Task analysis 0 0 0 5 5 Evaluation 2 4 0 0 6 Program development 114 9 4 13 140 Total 322 33 24 88 467

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 45.

4.4.5. Career Education

In employment policy, career education is a bridge between lifelong education, vocational training and the labor market. KRIVET has given its knowledge accumulated over the past 17 years through managing CareerNet to education offices and career information centers nationwide, serving its responsibility as a central-level R&D institution. KRIVET has also conducted research to support national career and HR policies.

Since 2011, the cumulative number of CareerNet users has reached six million, indicating growth of the nation’s best career information website. In the same year, KRIVET supported the Department of Career Education, which has emerged as an independent policy department within the Ministry of Education. In the process, KRIVET promoted career education for parents, smart content development to support career education at school, and a stronger training system for professional career counseling for teachers.

210 • 2014/15 Knowledge Sharing Program with Mexico Research and projects conducted in career education can be largely divided into career and jobs. The career area comprises the following five areas: support for national curriculum, career education and guidance, career information, career path for adults (core workforce, skilled workers, the unemployed and the disabled), career development and career training for career teachers. The job sector includes these three areas: work ethics, job research and support for central-local employment service staff. The following table describes projects in career education.

Projects Conducted in Career Education Sector (Unit: No. of Projects) Research areas Basic Consigned Research Project Total Curriculum 7 9 13 3 16 Career education, career 33 42 46 29 75 guidance

Career Career information 8 25 9 24 33 Career development 3 6 8 1 9 Career training 0 5 0 5 5 Others 0 6 2 4 6 Work ethics 7 0 7 0 7 Job research 14 3 15 2 17 Jobs Staff support 0 12 3 9 12 Others 0 1 0 1 1 Total 72 109 103 78 181

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 48.

The budget KRIVET spent on career education between 1997 and 2012 was KRW 17 billion. Basic projects accounted for KRW 5 billion of the budget, and consigned projects accounted for KRW 12.6 billion, or 71.3 percent of the budget.

4.4.6. Qualifications System

Over the past 17 years, the qualification system has achieved outstanding progress in the development and use of National Competency Standards (NCS) and National Qualifications Framework, and improvement of quality management of qualifications.

Since 2011, KRIVET has supported a pass-fail qualification system based on NCS, held a forum to improve the national system for skills qualification and transferred

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 211 strategies to improve public trust, field orientation and utility to policymakers. Furthermore, the think tank is competing to improve the standards of nationalization of private qualifications. In April 2012, 291 (plan) National Competency Standards were developed, and the plan went through the Committee for Qualifications Policies to be implemented at specialized high schools and junior colleges.

Major research areas between 1997 and 2012 were qualifications policy (42), NCS (41) and national skills qualifications (30). Yet little research has been done on basic vocational competency and the link between qualifications and education. A combined 186 consigned and 67 basic projects have been done with heavy concentration on private qualifications.

Projects Conducted in Qualification Sector (Unit: No. of Projects) Research areas Basic Consigned Research Project Total Qualification policy 21 21 42 0 42 Basic qualifications 10 7 17 0 17 National qualifications by 3 9 12 0 12 individual laws National skills qualifications 5 25 30 0 30 Private qualifications- 8 6 14 0 14 research Private qualifications- Qualifications 14 5 0 19 19 project Creation of new qualification areas and 0 26 26 0 26 improvement Link between qualifications 2 1 3 0 3 and education Infrastructure for qualification information 2 6 3 5 8 system NCS development 0 8 6 2 8 NCS research 1 40 36 5 41 National Curriculum development Competency 1 26 18 9 27 and use based on NCS Standards Basic job skills 0 4 4 0 4 Others 0 2 0 2 2 Total 67 186 211 42 253

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 57.

212 • 2014/15 Knowledge Sharing Program with Mexico 4.4.7. International Cooperation

KRIVET has performed numerous research and projects on international cooperation. In 1999, it opened the second UNESCO World Conference on TVET, assuming leadership as a VET research institution. In 2000, KRIVET was designated the UNESCO Regional Center of Excellence in Technical Vocational Education and Training, URC in TVET. Since then, KRIVET has been spreading Korea’s high-quality VET system in the Asia-Pacific region. Since its designation as a URC center in 2002, the number of VET-related projects on UNESCO member countries has spiked. The figure decreased for a while then picked up again in 2007. Between 2007 and 2009, KRIVET conducted the most studies on international cooperation.

Korea joined the OECD in 1996. KRIVET has since conducted cooperative projects with international organizations in HR development and VET, such as the OECD, World Bank, ILO, ADB, SEAMEO and VOCTECH.

From 1997 until 2012, KRIVET performed 285 R&D projects in international cooperation. The major research areas were joint studies with international organizations, developing countries and ODA-related research projects, international case studies, global comparisons and trends, and North Korea and reunification- related topics.

Projects Conducted in International Cooperation (Unit: No. of Projects) Research areas Basic Consigned Research Project Total International organizations 79 24 26 77 103 Developing countries and ODA 11 48 21 38 59 International case studies 26 20 39 7 46 International comparison and 30 28 42 16 58 trends North Korea and reunification 8 11 17 2 19 Total 154 131 145 140 285

Source: KRIVET, 15 Years of KRIVET and Its Challenges, 2012, p. 67.

Among all projects, those related to international organizations took up the biggest portion with 103, followed by developing countries and ODA (59), and international comparison and trends (58). Forty-six projects were done on international case studies and 19 on North Korea and reunification.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 213 4.5. Implications

4.5.1. Rationale for KRIVET’s Establishment

High-quality labor force explains the success of Korea’s economic development.62) This has to be supported by education and training required by the labor market and qualifications required by industry. Until the 1990s, however, Korean VET lacked a network connecting vocational education and training, qualifications and labor demand. To solve this, the government considered several solutions: merging the Ministry of Education and Ministry of Labor, establishing a national council with civilian participation and setting up a public think tank to link the aforementioned four factors. Among these options, the third was chosen, and KRIVET was born as a result. After its establishment, KRIVET was threatened with being abolished, but efforts were made to prove its necessity and raison d'être.63) This experience shows that for the establishment of a similar institute in Mexico, a forum to discuss the diverse interests of the government and industrial and educational sectors is crucial.

4.5.2. Success Factors and Obstacles after Establishment

KRIVET’s success factors after establishment can be divided into research projects and management. For research projects, not only VET and HRD policies were discussed with the Ministry of Education and Ministry of Labor, the Ministry of Trade, Industry and Energy, Ministry of Health and Welfare, and the Ministry of National Defense have also taken part in the discussion. Among these ministries, KRIVET has suggested HRD policies in the discussion, serving its purpose as a think tank. It also built a network among government-funded think tanks, private companies and academia to develop policy agendas to forward to the HRD Council. Especially, KRIVET has been designated an HRD support center after playing a leading role in establishing the Basic Plan for VET in 1999 and Basic Plan for NHRD in 2001.64)

Second, massive layoffs during the Asian financial crisis led to social turmoil in 1997. To tackle this issue, social integration and skills enhancement for re- employment through VET became the primary policy agenda. KRIVET responded to this issue through projects that set up a VET system, evaluation of VET institutions and programs for laid-off workers, and enhancement of vocational capacity development for the vulnerable groups, reassuring its status.65)

62) Kim Dongsuk et al.. Analysis of Growth Factors of the Korean Economy: 1970–2012. KDI, 2012. This show the increase of labor and capital put into production and technology improvement as the success factors behind the Korean economy. Public policy and socioeconomic, cultural and political factors also had indirect influence. 63) KRIVET, 10 Years of KRIVET, 2007, p. 44. 64) KRIVET, 10 Years of KRIVET, 2007, p. 50. 65) Cho Eunsang et al. (1997).

214 • 2014/15 Knowledge Sharing Program with Mexico Third, KRIVET forecasts the supply and demand of labor from a more concrete perspective through research on the labor market and employment currents, forecast of labor supply and demand, analysis of unemployment, and a study of VET demand. This was a breakthrough from previous studies that had mostly focused on the macro level. KRIVET secured data on VET and the labor market not only through surveys in individual research projects, but also through a first-level panel data at the national level. The panel data contributed to a number of research projects. KRIVET started the project to compile panel data on VET for youth, providing data on the labor market performance of school and enabling the provision of information to support the career choice of students from all levels of school. Later, through KEEP (Korea Education and Employment Panel), data were gathered on the link between the education and labor markets. And by building HCCP (Human Capital Corporate Panel), KRIVET accumulated massive data on VET from employers and employees, which enabled understanding of HRD status and private company currents and conducting relevant research to contribute to policymaking.66)

Fourth, in the event of lack of data on the qualifications system, KRIVET studied national and private qualifications to provide basic data on system reform as demanded by industries. The revised Basic Law on Qualifications was greatly influenced by KRIVET data, which improved the utility of national and private qualifications.67)

Fifth, KRIVET established a career information center for career guidance to secondary school students, career guidance program for parents, analysis of the job market, development and distribution of promising jobs, and systemization of job information. KRIVET also distributed TV programs through EBS (Educational Broadcasting System) to promote job ethics. Also, CareerNet was created to provide career guidance for students of all levels and adults, and now has an estimated 1.8 million members. Furthermore, KRIVET published Future Job World, which forecast supply and demand of labor, promising jobs and labor force supply by college major, providing useful career information for students and parents.68)

Sixth, KRIVET cooperated with foreign think tanks and conducted joint research with them. KRIVET has cooperated in VET with BIBB of Germany, CEREQ of France, and NCVER of Australia. Moreover, KRIVET strengthened its cooperation with the World Bank, UNESCO, OECD, ILO and APEC, and co-hosted dozens of international workshops and seminars. Especially in 1999, KRIVET hosted the second UNESCO International Congress on Technical and Vocational Education, which was an opportunity to promote KRIVET to international organizations related to VET, policy

66) More details can be found in 10 Years of KRIVET (KRIVET, 2007), pp. 50-51, 68-69, and krivet.re.kr. 67) KRIVET, 10 Years of KRIVET, 2007, pp. 54-55. 68) KRIVET, 10 Years of KRIVET, 2007, p. 48, 55-56, 75-76.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 215 institutes and experts in relevant fields.

The following are success factors behind research management:

First, before an establishment of KRIVET, R&D in vocational and educational policies was conducted by KEDI (Korea Educational Development Institute) under the Ministry of Education. Research on vocational training was conducted by Research Institute for Industry, Skills and Human Resources at the Korea University of Technology and Education under HRD Korea of the Ministry of Labor. As the planning committee for KRIVET was formed, the Ministry of Education, Ministry of Labor, KEDI and HRD Korea worked together to resolve conflicts over research projects, human resources and organizational status to be transferred to the new institute and formed a council that secured KRW 8.3 billion to set up KRIVET. When opened, KRIVET had 98 staff and researchers either newly hired or transferred from KEDI, HRD Korea, Korea University of Technology and Education, and Research Institute for Industry, Skills, and Human Resources. Due to the interdisciplinary nature of VET and HRD, KRIVET tried to secure researchers from diverse backgrounds such as education, economics, management, sociology, law, psychology and engineering. While such diversity created difficulty in communication, the gap was reduced through efforts to enhance mutual understanding in seminars and meetings across departments and positions.69)

Second, KRIVET tried to reflect opinions from experts and policymakers by organizing three meetings with around 10 experts from the relevant field for each project. To share research results with those of interest, it also organized seminars, workshops, discussions and policy forums.70)

Third, while enhancing research capacity by building a comprehensive information system, KRIVET supported VET and skills development of the entire nation. To improve efficiency, KRIVET established its own intranet, website, library system, groupware (email and board), research support system for HR, payment, finance and budget, firewall and statistical system.71)

Obstacles to KRIVET’s development included the following.72) First, as it was co- created by the Ministry of Education and Ministry of Labor, KRIVET saw a compromise in its independence from the power struggle between the two ministries. The competition was moderated by alternating recommendations for president between both ministries. But this measure could not entirely prevent the institution’s focus

69) Ibid., p. 39-42, 45, 47. 70) Ibid., p. 46. 71) Ibid., p. 47. 72) This statement is based on the author’s experience with KRIVET for more than 18 years since its establishment, along with observations of and discussions with stakeholders.

216 • 2014/15 Knowledge Sharing Program with Mexico from going in one direction. Second, overlapping in research functions with other state-funded think tanks was repeatedly mentioned in the process of government restructuring, which has influenced KRIVET’s stability. For example, HRD areas overlap with KEDI, creating competition between both institutions. Also, KRIVET was put in a competitive position with Korea Labor Institute in research and data creation in vocational training and HRD policy. Research on employment policy, careers and jobs has overlapped with the Korea Employment Information Service, challenging the institution’s identity. This has been resolved by changing KRIVET’s affiliation to the National Research Council for Economics, Humanities and Social Sciences under the Prime Minister’s Office. Yet KRIVET’s unique research functions can naturally reduce such competition and conflict. What is important is expanding KRIVET’s research areas from its original sectors.

5. Pilot Plan and Conclusion 5.1. Pilot Plan73)

The following list describes the pilot plan for the “Mexican VET Research Institute.”

1. Establishment scenario 2. Vision, mission & strategy 3. Major research functions (by 2020) 4. Personnel composition 5. Financial resources 6. Relevant laws 7. Cooperative institutions

5.1.1. Establishment Scenarios

Expansion of pre-existing research functions could be argued as being enough instead of establishing a Mexican VET Research Institute to solve Mexican social and economic problems such as low productivity and youth unemployment. Such functions are weak, however, compared to demands from schools and industry and spread across several institutions under SEP, so that they are not in the right position to research effectively and recommend policy suggestions. A Mexican VET Research Institute could enable inter-disciplinary research on the labor market, VET, employment and other topics with more synergy.

73) Pilot plans can be further developed into a master plan through discussion with stakeholders including SEP from 2016-17.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 217 Four scenarios to establish a Mexican VET Research Institute are suggested as follows:

First, it could be established under SEP, which is in charge of most VET. So demand from the consumer of VET policy can be directly delivered to the think tank. Such demand, however, would be mainly short-term and limits to mid- and long-term policies are probable. Furthermore, other research areas such as employment service on the part of STPS might be disregarded as they are not under SEP.

Second, it could be established under the Office of the President, and this would allow the institute to meet the policy demands of different departments, such as SEP, STPS and the Economic Department. But this would make inter-ministerial meetings dysfunctional in the beginning stage given the time, energy and resources needed.

Third, the Mexican VET Research Institute could be established under both SEP and STPS. It could fulfill demands from the two departments, but research independence might be compromised due to competition for hegemony. In Korea, vocational education is led by the Ministry of Education and vocational training by the Ministry of Labor. In Mexico, however, most VET is conducted by SEP. STPS is only in charge of vocational training linked to employment service.

Fourth, the Mexican VET Research Institute shall be solely funded by SEP while in cooperation with STPS and other relevant departments. That way, the institution can avoid ministries competing for hegemony and overlapping in research functions. Furthermore, such functions could cover not only SEP but also STPS and other relevant departments. Other mechanisms are needed, however, to make SEP cooperate with other ministries.

The following table shows the pros and cons of the four scenarios.

218 • 2014/15 Knowledge Sharing Program with Mexico

Pros and Cons of Four Establishment Scenarios

Scenario Advantages Disadvantages

Demand from the consumer of Such demand would be VET policy can be directly delivered mainly short term, and limits to the research institution. to mid- and long-term policies are probable. Furthermore, 1. Under SEP other research areas such as employment service on STPS’ part might be disregarded as they are not under SEP.

Can meet policy demands from Inter-ministerial meetings 2. Under Office of the different departments. would not function well in early President stage given time, energy and resources needed

Can fulfill demands from both Research independence departments might be compromised due 3. Under SEP & STPS to competition for hegemony between both departments.

Can avoid ministries competing Certain mechanisms are needed for hegemony and overlapping in to make SEP cooperate with 4. Under SEP research functions. Furthermore, other ministries. cooperating with research functions could cover not STPS and others only SEP but also STPS and other relevant departments.

5.1.2. Vision, Mission, and Strategy

The Mexican model of a VET think tank is envisioned as an institute that can conduct comprehensive research on the country’s VET, qualifications, labor market and career guidance and development, as well as provide policy consulting. Its mission and strategy can be developed through further discussions with a variety of stakeholders.

5.1.3. Research Functions

To establish a Mexican VET Research Institute, it is important to study research functions needed in Mexico. For that purpose, this chapter has reviewed VET institutions and VET-related research functions in Mexico, and provided information on the background and research functions of KRIVET, which can be benchmarked by Mexico.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 219 The Mexican VET Research institute can perform the major function of research in the following eight areas.74) First, research functions in curriculum development, VET policy and qualifications should be improved. Studies on VET, labor market, career guidance and development, on-the-job training and start-up education, social and informal economy, and public policy can also be performed by the institution.

More detailed research areas can be listed as follows: 1) customized curriculum development for industry, development of a program for vocational teacher training and curriculum development related to qualifications in curriculum development; 2) mid and long-term development plan for VET, customized VET policy, performance evaluation and orientation of a dual education system in VET policy; 3) labor supply and demand prospects in strategic industries and future jobs, school-to-

[Figure 4-9] Research Functions of Mexican VET Think Tank

• Customized curriculum • Mid/long-term development development for industry plan for VET Function

• Vocational teacher training • Customized VET policy program • Performance evaluation and • Qualifications-related orientation of dual education curriculum development system

• Plan, practice, and assessment for NHRD policy • Labor supply and demand Demand Curriculum prospect in strategic industries • Issues and challenges of VET Policy policy assessment Development • Supply and demand prospect of future jobs • Construction of HRD assessment system • School-to-work policy Public Labor • School-industry Policy Research Market • Job creation for youths collaboration policy Functions of "Mexican KRIVET" • Career guidance for youths • Invigorating social Social / Career training economy Informal Guidance & Economies Development • Employment support for univ. • HRD for school Economy graduates

• Status and issues of informal OJT and • Career development support economy and policy directions Entrepreneurial Qualification for the middle-aged • HRD for informal economy Education • career development for the unemployed • Model development for on- • Qualification standards for the-job education strategic industries • Leadership development for • Linkage between school manager education and qualification • Entrepreneurial support policy • Linkage between VET and for the young people qualification system • Entrepreneurial system • Integration of qualification development system

74) Other critical functions, for example implementation of standards, are sensitive among a variety of stakeholders and consideration of additional functions for a Mexican VET think tank needs more discussions and coordination among stakeholders.

220 • 2014/15 Knowledge Sharing Program with Mexico work policy and job creation for youths in labor market; 4) career guidance for youths, employment support for university graduates, career development support for the middle-aged and unemployed in career guidance and development; 5) qualification standards in strategic industries, links between school education and qualification and between VET and qualifications, and integration of a qualification system in qualification; 6) a model of development for on-the-job education, leadership development for managers, entrepreneurial support policy for youth and entrepreneurial system development in OJT and entrepreneurial education; 7) invigorating social economy, HRD for social economy, status and issues of informal economy and policy directions, and HRD for informal economy in social and informal economies; and 8) issues and challenges of policy assessment, construction of HRD assessment system, school-industry collaboration policy, and construction and evaluation of NHRD policies in public policy.

The success factors of the Mexican VET think tank with the research functions listed above can be summarized as follows.75) The first recommendation is to analyze research needs in addition to pre-existing research functions as provided above and receive opinions from relevant government agencies such as the Ministry of Education and Ministry of Labor, private companies and experts on the identity of the new institution. If the institution is established based on the consensus of the private sector, the government and academia, not only will it deter a possible confrontation over the institute’s raison d'être, but also help the institute to maintain concrete status in VET and HRD. In other words, the institute will not repeat the case of CONOCER, which was once abolished due to doubts over its functions.

Second, Mexican research functions in curriculum development, teacher training and qualifications are distributed and overlapped in certain areas among COSDAC, CONOCER, CIDFORT and CNAD. But certain overlapping research functions such as curriculum development and teacher training are no cause for worry because the objects of curriculum development and teacher training differ dramatically. In case of integrating research functions into establishing the Mexican VET think tank, several scenarios need development so that smooth structural adjustment can be made. Unfortunately, no research functions seem to exist for the labor market, career development and VET policies. So while measures are needed to combine pre-existing research capacity to create synergy, research needs should be identified and relevant research capacity should be developed. In particular, a new and inter- disciplinary approach toward critical research areas such as VET, labor economics, career guidance, national HRD, the informal sector, social economy, evaluation, and public policy needs emphasis in newly created research functions.

75) A more detailed plan will be provided in the second year’s report (2015–16) after studying relevant laws on SEP.

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 221 5.1.4. Personnel Composition

According to the vision, mission, strategy and future research demands as well as financial resources available, personnel composition will be made and recruitment will follow.

5.1.5. Financial Resources

After an establishment plan is made, financial resources available will be determined based on relevant laws and regulations of Mexico.

5.1.6. Relevant Laws

To establish a Mexican VET think tank, a support law is crucial. For KRIVET, the Korea Research Institute for Vocational Education and Training Act, Vocational Education and Training Promotion Act and Framework Act on Qualifications were key. Under the first law, KRIVET was set up to research and develop VET policies, collect, manage and disseminate VET-related data and materials, develop and disseminate VET programs, study nationalization of private qualifications, and evaluate and certify VET institutions and programs.76)

5.1.7. Cooperative Institutions

The research areas the Mexican VET think tank would cover are so wide that cooperation is needed from different ministries and other organizations such as companies, unions, employer organizations, and public and private training institutions. The role of the institute needs to be defined vis-à-vis its relationship with other cooperative institutions77).

In sum, a task force for the establishment of a Mexican VET think tank should be created in SEP, composed of experts in the field. Leadership could be developed through monthly or quarterly meetings, and additional agenda would be developed to turn the pilot plan into a master plan. Under this process, inter-ministerial meetings could be considered to draw cooperation from different ministries in charge of vocational training and HRD in their own areas.

The plan should be executed in phases. The system, laws and budget for setting up the institute should be studied in 2015–2016, and the master plan should be finished in 2016–2017.

76) KRIVET, 10 Years of KRIVET, 2007, p. 40. 77) Clarification of detailed roles will be explained in the master plan.

222 • 2014/15 Knowledge Sharing Program with Mexico References

Cho, Eunsang et al., European Experience Training Evaluation for the Unemployed—France, Germany, Sweden, the United Kingdom, KRIVET, 1997. Cho, Eunsang and Young-soo Kim, Skills Development and Industry-Academia Cooperation in Hidalgo, KDI-KSP, 2013. Cho, Eunsang, Chung, Jisun, Park, Cheonsoo, Lim, Kunjoo, Bae, Yuri, Jeong, Insoo, Choi, Hyung-Jai, Lee, Joung Hoon, “2014 Joint Consulting with IOs: IDB Support for Integrated Labor System in Mexico,” Inter-American Development Bank, forthcoming. Inter-American Development Bank, Mexican Labor Market and Vocational Education and Training System, Labor Market and Social Security Unit, 2014. , Toward a National Framework of Lifelong Learning in Mexico, 2014. Instituto Nacional de Estadística y Geografía, “Encuesta Nacional de Ocupación y Empleo,” presentation, Fourth Quarter, 2013. , “Encuesta Nacional de Ocupación y Empleo,” presentation, First Trimester, 2014. Kim, Dong-suk et al., Analysis of Growth Factors of the Korean Economy: 1970–2012, KDI, 2012. KRIVET, Establishment of KRIVET and Its Main Functions, 2002. , 10 Years of KRIVET, 2007. , 15 Years of KRIVET and Its Challenges, 2012. OECD, Learning for Jobs, 2009. , Education at a Glance, 2011. Secretaría de Educatión Pública, CONALEP: National College of Technical Professional Education, 2014. Secretaría del Trabajo y Previsión Social, “Labor Policy and the National Employment Service,” PowerPoint presentation, 2014a. , “Mexico’s Labor Market Overview,” PowerPoint presentation, 2014b. www.ghrforum.org www.krivet.re.kr

Chapter 4 _ Suggestions for Establishing a Think Tank for VET and Lifelong Education • 223

2014/15 Knowledge Sharing Program with Mexico: Enhancing Innovation Capacities for Sustainable Development of the Mexican Economy Chapter 5

Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds)

1. Inquiry into the Subject Requested by Chihuahua State 2. Korea’s Experience in Metal-mechanics SMEs 3. Advisory Research Results ■ Chapter 05

Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds)

Sujin Kim (Gyeongsang National University)

Summary

This project of continuous consulting started with the KSP 2013 for the fabrication laboratory to supports domestic companies to launch new products by helping to develop the first prototypes. If the prototype is successfully supplied to international companies or the global market, mass production of dies and molds should be continued to increase productivity and decrease costs.

The main topic of this project is to improve the metal mechanics cluster capabilities in Chihuahua, especially in the die and mold sector. The first task is to support improvement of training and education in the industry for mass production, especially interaction among businesses, universities, technological schools and training centers. The second is to design instruments reflecting the best practices for die and mold SMEs (small and medium enterprises) in Chihuahua to provide export strategies for the die and mold industry. The third is to design a mechanism to promote a matchmaking system between SMEs in Chihuahua and businesses and organizations in Korea to transfer technology, knowledge and knowhow in die and mold manufacturing.

A role model for stamping die SMEs is CADISA, a supplier of sheet metal components to international companies with progressive die technology, but Chihuahua has no successful plastic mold maker yet, though it has a mold developer, mold repairer and three machinery companies. International companies in

226 • 2014/15 Knowledge Sharing Program with Mexico Chihuahua import molds for plastic injection and die casting from the U.S. or Asia.

Korea’s first mold company was Hanjin Die and Mold Co., Ltd., established in 1958, and Jeilmold, which was started in 1959. Kishin Precision cooperated with a Japan mold base manufacturer and started to supply standard mold bases to mold industries in 1975. Die and mold education was begun in the Department of Die and Mold at Korea Polytechnics II in Incheon in 1974. Korea Die and Mold Industry Cooperative was established in 1979 and held the country’s first international exhibition on dies and molds and related equipment named InterMold Korea, which has been held every two years.

In 2009, Korea had 1,338 die and mold companies that each employed more than 10 people, of which 51 percent were based in Incheon, Gyeonggi-do or Seoul. The yearly production volume of plastic injection mold is 41 percent, press die 35 percent, die-casting mold 2 percent and others 22 percent. Korea in 2014 was the world’s second-largest die and mold export, with shipments of US$3,228 million and imports of US$158 million. China led the industry’s exports with US$4,926 million. The top three markets for dies and molds are the U.S. with US$3,093 million, Mexico with US$2,630 million in 2012, and China with US$2,599 million. Korea is the world’s No. 2 exporter of molds, while Mexico second in the world in importing molds.

Mexico needs to form a mold industry association and share a list of technologies, phone numbers and addresses with plastic companies. Mold-making engineers should teach other company members how to design, fabricate and use molds in the mold training program of CENALTEC.

Technological University of Chihuahua (TUC) and CENALTEC should share office and training space with domestic businessmen who want to develop dies and molds. If more than three domestic companies start mold manufacturing businesses at the university, they will collaborate and compete to create success in the marketplace. Cooperation and competition of three mold makers will reduce prices and increase the quality of the domestic mold industry.

TUC should hire professors from Korea Polytechnics on sabbatical as visiting professors for one semester or year to set up a mold education program. The visiting professors should be able to work for a year at any institution in the world individually. Korean Polytechnics professors will show how to teach mold design at university to 20 Mexican instructors, who will be able to teach 400 students every semester.

The cooperation model of Chihuahua and Korean SMEs and universities suggests that engineers start maintenance service and a mold building business with the

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 227 equipment of TUC and Korean technology in mold making. The first step is to improve the rule of TUC so that engineers in Chihuahua can use the facilities needed for mold making. The second step is to conclude maintenance contracts with Korean die and mold makers that export products to international companies operating in Mexico and start a partnership responsible for maintaining delivered molds. The third step is to establish a joint company and take direct orders from international companies based on the good maintenance relationship and mold design technology of Korean partner companies.

Mexican mold companies are repairing molds themselves, but have no relations with international counterparts. The Korean mold technology center in Mexico will become a partner of mold companies in Mexico. In Mexico, free rent for buildings have been granted for 15 years and the Korea Die and Mold Industry Cooperative established the center by providing equipment and operating cost. Mexico learns Korean mold technology and Korea exports mold to OEM automotive companies and maintain molds in central Mexico.

The Mexican people who want to learn international technology, and Korean SMEs, with advanced technologies and employment of foreign workers, are good partners. If the central government of Mexico signs an agreement allowing the sending of Mexican workers to Korean small manufacturers, they can earn enough salary to live in Korea and learn technology required for the metal mechanics industry. They will go back to Mexico, after being trained in world- class manufacturing technology melt and increase the technological capacity of Mexico. This is similar to the practice of Mexican mold companies hiring retired mold technicians from Spain for three years, and China employed retired mold technicians from Korea and Japan 15 years ago.

Mexico is a mold importer at present, but will become an exporter ten years after TUC and SMEs in Chihuahua share facilities, educate and train Mexicans to learn advance mold making technology in Korea, and put them to work. The suggested policy that does not require funding is the minimum role of the Chihuahua government, but the Chinese, Japanese and Korean governments will spare no effort to support mold makers who will compete against Chihuahua SMEs.

228 • 2014/15 Knowledge Sharing Program with Mexico 1. Inquiry into the Subject Requested by Chihuahua State 1.1. Introduction

1.1.1. Summary and Analysis of Chihuahua’s Requirements

This project is the continuation of a much deeper cooperation started in KSP 2013 to establish a fabrication laboratory that implements the idea of Mexican companies to real prototypes. If the prototypes made via the fabrication laboratory are successful in the market, production should be developed to reach a million die and mold parts per month. But Chihuahua is importing dies and molds from abroad, and thus its manufacturing technology depends on die and mold exporting countries.

The primary theme of this project is to improve the capabilities of metal mechanics clusters in Chihuahua. The first task is to support for improvement of training and education programs in the die and mold industry for mass production, especially interactions among businesses, universities, tech schools and training centers. Second is to design instruments reflecting the best practices for die and mold SMEs in Chihuahua to provide export strategies for the sector. Third is to design a mechanism to promote a matchmaking system between SMEs in Chihuahua and companies and organizations in Korea to transfer technology, knowledge and knowhow in the industry.

Mexico in 2012 imported US$2,630 million in molds, dies and tools, and has no comparable stakeholders who can provide these products. The inability to produce dies and molds creates dependency on producers and often limits advanced manufacturing capacity by domestic companies. The PROMEXICO road map for design, engineering and advanced manufacturing emphasizes the need to encourage the consolidation of advanced manufacturing capacities in Mexico.

This task seeks to overcome the three main challenges of the metal mechanics sector related to die and mold processes: secure more and better-qualified human resources, improve processes and technology needed to improve quality, and establish relations with international collaborators.

The first subtopic is benchmarking training and education program for the technical schools. A pressing need is to improve the capabilities of students and trainees in die and mold processes. A consultant helps to develop a specific curriculum for both engineering and technical levels, and also determines the best path to interconnect the industry’s needs with the education sector. He or she also helps to

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 229 develop the content of education degrees and specialties for both engineering and technology in die casting and plastic molds in advanced manufacturing.

The second subtopic is the government’s strategic public policy to foster the die and mold sector. By learning from Korea’s case study and best practices, the government can implement specific policies to foster the sector. Which are the products and processes that present more potential for Chihuahua SMEs? How can the Chihuahua state government foster these processes? Which public policies are the best to implement in which way? How can the state government attract foreign investment in the sector?

The third subtopic is matchmaking between Chihuahua SMEs and Korean counterparts. One major constraint of Chihuahua businesses in the sector is lack of knowledge and strategic partnership. Korea and Mexico are natural partners in dies and molds for mass production. Korea has the knowledge and export capabilities and Mexico represents a big market, thus the need to generate partnerships between the private sectors of the two countries.

PROMEXICO can support the efforts of Chihuahua entrepreneurs to seek partnerships and knowledge, and can help Korean companies conduct market surveys in Chihuahua. How Chihuahua SMEs develop a network with Korean companies in the sector? How can the Chihuahua government form and develop a new association in the sector? Which are the best methods for Chihuahua SMEs to acquire technical knowledge? Which Korean companies have the interest to generate partnerships with Chihuahua entrepreneurs?

1.1.2. Automotive Industry and Dies & Molds in Mexico

The world’s top five producers in the die and mold industry are the same as the world’s top five carmakers. China is the world’s biggest auto manufacturer with about 237 million units (26 percent) in 2014, followed by the U.S. (13 percent), Japan (10 percent), Germany (7 percent) and Korea (5 percent). Mexico is seventh worldwide in carmaking, and thus has a good opportunity to manufacture dies and molds though it imports most of them.

The Mexican auto industry has been driven by foreign companies for vehicle assembly that cooperate with automotive parts makers located around their assembly plants for exact delivery time of supplies. Light-vehicle OEM companies are located in the auto maquiladoras areas including Chihuahua, and the heavy vehicle OEM companies are in integral regions such as Mexico and Puebla.

230 • 2014/15 Knowledge Sharing Program with Mexico Output volume of Mexico’s automotive parts industry was US$75 billion in 2012, according to Pro Mexico 2013. The country has 1,342 automotive parts plants, and Chihuahua (145) has the largest number in Mexico.

[Figure 5-1] Output of Mexico’s Auto Parts Industry

74,795

67,989

57,599 55,764

39,939 Million Dollars

Año 0 2008 2009 2010 2011 2012

Source: PROMEXICO 2013.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 231 [Figure 5-2] Location of Light and Heavy Vehicle OEMs in Mexico

Source: PROMEXICO 2013.

232 • 2014/15 Knowledge Sharing Program with Mexico

Auto Plants in Mexico

Car body & trailer Auto parts State Auto plants TOTAL plants plants MÉXICO STATE 9 88 126 223 PUEBLA 4 124 71 199 NUEVO LEÓN 8 67 119 194 CHIHUAHUA 0 26 145 171 COAHUILA DE ZARAGOZA 2 20 137 159 MÉXICO STATE 9 88 126 223 JALISCO 4 62 78 144 GUANAJUATO 3 32 87 122 QUERÉTARO 5 14 88 107 TAMAULIPAS 0 18 83 101 VERACRUZ DE IGNACIO 1 52 23 76 SAN LUIS POTOSÍ 2 16 49 67 SONORA 1 15 42 58 BAJA CALIFORNIA 5 20 30 55 AGUASCALIENTES 3 12 38 53 MICHOACÁN DE OCAMPO 0 39 6 45 SINALOA 1 24 12 37 CHIAPAS 1 24 9 34 HIDALGO 2 15 13 30 OAXACA 0 25 0 25 YUCATÁN 0 17 5 22 DURANGO 0 6 15 21 MORELOS 1 6 12 19 TLAXCALA 0 6 13 19 ZACATECAS 0 4 13 17 GUERRERO 1 10 4 15 COLIMA 0 6 3 9 TABASCO 1 6 1 8 BAJA CALIFORNIA SUR 0 4 2 6 NAYARIT 0 5 1 6 CAMPECHE 0 3 0 3 QUINTANA ROO 0 1 2 3 TOTAL 63 799 1,343 2,205

Source: PROMEXICO 2013.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 233 1.1.3. Plastic Companies in Mexico

Plastic companies are the customer of mold makers, and Mexico has the world’s 12th-largest market for plastic materials, with consumption of 5.3 million tons per year. The nation has an estimated 4,100 plastic companies (84 percent small, 12 percent medium and 4 percent large), of which 42 percent are concentrated in the state of Mexico and Mexico City, 14 percent in Jalisco, 8.5 percent in Nuevo Leon and 3.4 percent in Baja California Norte. Mexico has enough PVC, PET and polystyrene suppliers but those with polyethylene and polypropylene are limited in number. They consume about two million tons of polyethylene per year; only a fourth is produced in Mexico and the others are imported from the U.S. and Canada. Polyethylene is a major plastic material used in cars and electronics.

Plastic Companies in Mexico

Mexico City Nuevo Baja California State Jalisco Other States Total & State Leon Norte Company 1,720 570 350 140 1,320 4,100 Share(%) 42 14 8.5 3.4 32.1 100

Source: National Association of the Plastic Industry.

1.1.4. Steel Plants in Mexico

[Figure 5-3] Location of Steel Plants in Mexico

Source: steels.org.

234 • 2014/15 Knowledge Sharing Program with Mexico Sheet metal is a key material for automotive and home alliance structures. Tool steel is the material for dies and molds. The basic oxygen furnace (BOF), using the dominant steelmaking process, is located in north Chihuahua and central Districto Federal. Thirteen electric arc furnaces (EAF) are located in central Mexico and four EAFs are located in the north.

1.1.5. Machine Tools of Mexico

Machine tools are the infrastructure of the die and mold industry. Mexico ranks seventh in the world machine tool market, with US$2,076 million in machine tools consumed in 2014. About 84 percent of sales came from importers, mainly from the U.S., Germany and Japan. Mexican producers posted revenue of US$374 million in 2013, specializing in portable hand-held power tools.

Korea is the world’s fifth-biggest maker of machine tools and fourth-biggest consumer, which means the sector’s infrastructure is strong domestically.

[Figure 5-4] Global Machine Tool Production and Consumption

million $ 16,000 14,687 Production (2013) Consumtion (2014) 14,000 12,326 12,000 11,424

10,000 9,294 8,743 7,954 8,000

6,000 5,306 5,710 4,956 5,084 4,471 4,000 2,423 2,076 2,000 374 0 China USA Germany Korea Japan Italy Mexico

Source: KOMMA (http://www.komma.org)

1.1.6. Die & Mold Industry in Mexico and Chihuahua

Mexico imported US$2,630 million in dies and molds in 2012, and Chihuahua is assumed to have imported US$284 million if mold requirements are linearly proportional to automotive parts.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 235 The number of injection machines and the market size of injection molds were estimated from questions asked to export companies in Chihuahua City in 2013. The number of injection machines was 557, that of injection molds 4,240, annual mold investment US$7 million and annual mold reparation expense US$6 million in Chihuahua City.

Manufacturing in the state of Chihuahua is concentrated in Chihuahua City and Juarez, and the size of the Juarez economy 60 percent bigger than Chihuahua City’s. If the mold market size of Juarez is estimated based on the size of the economy, the number of injection molds is estimated at 11,000, annual mold investment US$18 million and annual mold reparation expense about US$16 million in Chihuahua state.

The international businesses interviewed in Chihuahua City import American- made molds because of the close distance between Chihuahua and manufacturers, as well as those from China because of lower prices. Korean mold makers need a differentiated approach of joining Chihuahua mold makers for fast maintenance and high technology to compete with U.S. companies, who enjoy a logistical advantage, and Chinese suppliers, who can offer molds at the cheapest prices.

Injection Machine Capacity of Chihuahua City

Clamp force (ton) 25–250 250–500 500–1,000 More than 1,000 Total

No. 355 129 57 16 557

Source: INDEX - Export Industry Association Chihuahua, 2013.

Mold Market Size of Chihuahua City

Mold number Annual investment in molds Annual mold reparation expenses

4,240 US$7.06 million US$6.05 million

Source: INDEX - Export Industry Association Chihuahua, 2013.

1.2. Overview of Chihuahua’s Die & Mold Industry

1.2.1. International Businesses in Chihuahua City

The main metal mechanical industry of Chihuahua has grown up quickly thanks to international companies that assemble plastic and metal components created by imported dies and molds. Such companies in Chihuahua assemble automotive

236 • 2014/15 Knowledge Sharing Program with Mexico modules using cheaper labor. The plastic and metal parts of the module are also produced by foreign enterprise in Chihuahua because of huge transportation costs for the large volume of parts and metal parts. The transportation cost of dies and molds is low because one mold can produce millions of plastic or metal parts. The international companies import chipper dies and molds from Asia and the U.S. rather than develop it through a Mexican company.

A KSP consultant visited and interviewed managers to ascertain the industrial situation of the die and mold industry in Chihuahua City in January 2015.

Pace Industries (pacind.com) is a U.S. company that started a Chihuahua division in 1999. Its main process is die casting for producing aluminum parts by injecting molten aluminum alloys into the metal mold at high pressure. The final geometry is formed in a short time by the die casting mold and the useless flow line is cut off by the cutting die. Customers of die casting part are in electrical lighting (58 percent), automotive (23 percent), home appliances (8 percent) and telecommunication (6 percent). The number of automotive customers is expected to increase faster than other sectors. About 250 are used directly, and the number of workers will be double if indirect employment is included. The quantity of sails was US$62.6 million in 2014. The equipment is a furnace that melts aluminum alloy with electric heat, with 29 die casting machines injecting molten alloy into the mold at high pressure and 30 machinery centers cutting and drilling to fix a precise geometry required for assembly.

The die casting mold, a key tool in the process, is imported from Taiwan, China and the U.S. Though they desire to build molds in Chihuahua because of the long delivery time needed for Chinese imports, they hold a small tool shop only for maintenance service that removes rust and replaces worn-out ejecting pins of used molds.

Relations with small companies are little. For instance, the company HASY, which has mold repair technology, has attempted but failed to get together with a mold maintenance partner because he had insufficient facilities and finance. Die casting molds made by an Italian company in Queretaro are more expensive than Asian imports. They took their direct concerns to foreign mold makers, then met with mold repair companies in Chihuahua.

TRW Automotive (trw.com) is a global supplier of safety systems and posted sales US$17.4 billion in 2013. TRW‘s Mexico division is producing automotive air bags and steering wheels and its Chihuahua division is making steering wheels by die casting, plastic injection and assembly procedure. The company has approximately 3,000 people working on the main operation of assembling aluminum alloy, plastic

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 237 and air bag parts to the final steering wheel. In general Chihuahua divisions of global companies employ a bunch of people to assemble automotive parts that are produced by die casting and plastic injection molding.

Die casting molds for aluminum or magnesium alloy and plastic injection mold for plastic parts are directly imported from the U.S. European Union and Asia. Tool room repair molds turned up at the manufacturing plant and the tool room coordinator was interviewed. Mold repair and welding for repair are reasonable businesses for small companies in Chihuahua. A few companies that repair mold lack machine tools of adequate size and repair knowledge. The size of machinery space requires 1,000x600x600 mm and the weight of one ton should be controllable. Solid work is used by Chihuahua companies, but not enough compared to NX used by mold makers in general. Workers should have knowledge of mathematics and die structure. An engineer who is doing repair at large companies can teach people working at the small repair company. The cosmetic mold maker should be certified by an original equipment manufacturer supplying modules to the final carmaker. One Mexican company called Iberomold tried to gain Portuguese knowhow in the 1990s. The manager, who was not a technician, came to the company, which had little technology. The company failed to supply the molds and left the industry.

Manesa (manesa.com) is a sheet metal-stamping company established in Chihuahua by a Belgian engineer in 1988. The CEO is also a Belgian who considers small stamping companies in Chihuahua competitors, not suppliers. Manesa has small to large size pressing machine for production of sheet metal parts.

Progressive dies are designed and made at the tool and die room of the company. The room also does all the maintenance of dies imported from China and the U.S. He did not want to outsource low value-added products or build a simple stamping die for small companies. He prefers progressive die makers among foreign companies to a small die company.

1.2.2. Domestic Companies in Chihuahua City

Foreign companies in Chihuahua import plastic injection and die casting molds from the U.S. or Asia. Chihuahua City has no successful plastic mold maker, though a mold developer, mold repair company and three machinery companies exist.

If the government liberalizes the molding market under a free economy, Chihuahua-based die making companies will not survive international competition because their molds are expensive and of low quality compared to Asian molds. Dies and molds use standard technology for large volume production. Foreign companies will not include Chihuahua plastic or metal parts makers in the supply chain if die

238 • 2014/15 Knowledge Sharing Program with Mexico and mold technology is not developed in Chihuahua.

A model for stamping die SMEs is CADISA supplying sheet metal components to foreign companies with progressive die technology. Foreign businesses in Chihuahua need not build new factories to make sheet metal parts in Chihuahua because a domestic company can develop progressive dies and supply sheet metal components. International companies also want domestic plastic and metal part makers that have mold development technology to reduce the risk of moving parts factories far away. Such companies will move only their assembly lines and Chihuahua SMEs will supply plastic and metal parts if good mold makers are in Chihuahua. Since there are enough plastic and metal part manufacturers, small companies that have metal machinery technology can begin a mold making business with the proper knowledge and infrastructure.

All interviewed Chihuahua companies agreed to become partners of Korean mold makers that are looking for mold maintenance companies in the state. Chihuahua metal machining companies can start mold repair for Korean partner mold makers and improve technology to make molds designed by the partner company.

1.2.2.1. Progressive Die, CADISA

CADISA (cadisa.com) is a Mexican company that produces sheet metal parts by the stamping process. It entered the stamping business in 1990 with the help of an American company that supported equipment and sent engineers for three months to transfer technology. After teaming up with the American company, CADISA extended its business to other companies. The Chihuahua government did not fund the company to buy equipment or develop technology. The company has a stable workforce with knowledge and wants to employ high-level engineers from Monterrey, but the long distance makes this hard. Six stamping companies are in Chihuahua, most of them American.

The process is punching, blanking and bending of sheet metal by progressive dies. Progressive dies are developed by the company and enough technology exists to develop dies for other companies. A deep drawing die was designed by the company, but engineering analysis was outsourced to the U.S. The company president also played an important role to select and operate the punch press and press brake of the fabrication laboratory consulted by KSP 2013.

Now Chihuahua has good solutions for sheet metal part development. The idea of a designer is realized in a prototype in the fabrication laboratory for testing. If it is successful in the market, CADISA will be able to develop a progressive die that could potentially be used to produce a million parts. The company is a role model for

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 239 Chihuahua-based small businesses.

1.2.2.2. Machinery, PALOMINO

PALOMINO (rectificacionespalomino.com) is a Chihuahua family business that rebuilds and reconditions used engines. It has a machinery center, turning center, grinding machine and wire electrical discharge machine required for repairing engines. Sufficient equipment and engineers who have experience in design, machinery and engine repair are attractive to start a mold making business.

The company should employ a technician experienced in mold repair if it wants to start a mold repair business. PALOMINO is ready to become a Chihuahua die and mold maker. The network with domestic plastic or die casting companies who will be customers and Korean mold companies who have technology are keys to success in the mold business. They will be able to run a business related to mold maintenance and building die casting molds, plastic injection molds and extrusion dies.

1.2.2.3. Mold Repair, HASI

HASI is a stamp company that repairs plastic injection and die casting molds of international companies in Chihuahua. It employs five people and has CNC, grinding and electric discharge machines and all equipment to make and repair molds. CEO Gerardo Belmont learned mold repair technology from a domestic company in Mexico City. He is also developing simple plastic injection molds for domestic plastic companies, but not for big international companies. This is because the price of his mold is more expensive than those from China and the U.S. HASI is not getting financial help from banks or the government like Asian mold companies can to build factories and buy facilities. HASI’s closed process for making whole molds inside the company also makes its prices higher than those of Korean mold makers that outsource standard mold bases and components. The name value of domestic companies also makes it difficult to obtain an offer from abroad.

The company agreed to become a partner with Korean mold makers looking for a maintenance partner in Mexico. He conducted maintenance service on the mold built by the partner company as the first step. The Korean partner designs molds and the domestic company fabricates and supplies them to plastic companies in Chihuahua as the second step. Chihuahua companies will design and fabricate molds themselves in the final step. The reliability of such cooperation will be increased if they agree to develop molds and maintenance together.

240 • 2014/15 Knowledge Sharing Program with Mexico 1.2.2.4. Rubber Molds, CBQ Technology

CBQ Technologies (cbqtechnologies.com) is a family-owned company that makes aluminum parts for electronic products. They have SolidWorks software, HASS machinery center and machines for milling, lathe, grinding and welding.

CBQ made and supplied 10 rubber molds designed by the international company DANA’s Chihuahua division. The plan is to build hundreds of rubber molds for DANA. Staff lacks the knowledge to design rubber molds or build plastic injection molds. They can get into the mold making business if a Korean partner design a stamp and the domestic company makes and supplies them to rubber production companies. The equipment is attractive enough to have the Korean mold maker want a Mexican factory for mold maintenance.

[Figure 5-5] Rubber Mold, CBQ Technology

1.2.2.5. 5x Machinery, Altaser Aerospace

Altaser Aerospace (altaser-aero.com) has the best five-axis machinery technology in Chihuahua. It has NX software and centers for turning, machinery and five-axis machinery. The material cut is Inconel, a stainless and tool steel that is difficult to use in machines. Stainless steel parts for oil plants are turned and milled by a five-axis machine tool.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 241 The company is the best candidate to become a domestic mold machinery company and a mold maintenance center for a Korean partner that exports mold to Mexico. Altaser’s five-axis machinery technology helps cut time needed in electrical discharge machinery in mold. The NX software is the most widely used by mold makers.

1.2.2.6. Mold Maker, Plasti-contenedores

Plasti-contenedores is a private company of Abram Thiessen that develops plastic injection mold. Thiessen learned how to make plastic injection molds himself and did the plastic part of the development business with his mold development and plastic injection technology. His factory has enough equipment to develop plastic injection molds and produce plastic parts.

The company said international companies in Chihuahua imports molds from Asia and the U.S. because Mexican mold is more expensive than China’s. Why is Mexican mold more expensive than China’s? Mexican mold engineers themselves develop all processes from design, fabrication, assembly and test injection, while Chinese engineers are specialized in design, tool path generation, NC machinery, electric discharge machinery, polishing and assembly. Specializations of engineers raise technology level and decrease cost. The Chihuahua mold maker does not compete because of just one mold maker and one mold repair company. Korea has thousands of mold makers and they must compete to survive. More than three mold makers should be established to decrease prices and increase quality. The Chihuahua mold maker does not outsource a low value-added process used rarely.

Other domestic companies in Chihuahua do not recognize how to plan and build molds. Learning mold from a Korean molding engineer who cannot speak Spanish is not the best answer. Thiessen, who speaks Spanish, English and German, knows all mold design and making processes and has long experience in mold making, making him the best teacher for company workers, university professors and teachers at the technology education center in Chihuahua.

1.2.3. Korean Mold Makers in Mexico

The KSP consultant visited Korean mold makers and related companies in Mexico in August 2013 after conducting official business. Korean mold makers with technology also repair mold because Mexico’s expensive mold infrastructure makes imported molds cheaper than domestic. The country’s infrastructure for die steel, NC machinery, electric discharge machinery and standard mold bases and elements are expensive because they are imported from the U.S., Germany and Japan.

242 • 2014/15 Knowledge Sharing Program with Mexico 1.2.3.1. Sheet metal stamping, INA Precision at Queretaro

The main customer of INA is Daewoo Electronics, which moved its factory to Queretaro with INA in 1996. INA produces the sheet metal parts of the laundry machine with progressive dies. The main equipment is the press machine and painting system. The dies are imported from Korea and repaired in Mexico. The tool and die center of Samsung Electronics in Queretaro is also importing mold from Korea and does only maintenance.

The CEO of INA talked why he should import molds from Korea. The background infrastructure of Mexico (wire electric discharge machinery and CNC milling) required to develop dies is 30–40 percent more expensive than in Korea. Die steel is also expensive. POSCO entered Mexico in 2009 and shared 30 percent of the sheet metal market because products were cheap and of good quality. The people preferred to work by day only, while Korean die makers work from 8 a.m. to 9 p.m. in general and the CNC machine runs overnight. Because the Korean mold maker builds a mold in 30 days and sends it by ship in 60 days, Korean companies in Mexico order molds from Korea and uses a Mexican company only for maintenance.

1.2.3.2. Plastic, SEI at Queretaro

SEI moved its plastic injection factory to Queretaro in 1996 with Daewoo Electronics and became a locally incorporated company. SEI produces plastic products for Daewoo, GM, a domestic medical company and domestic builder. International companies order large volume and earn low profit while domestic companies order small volume for high prices.

Molds are imported from Korea, Japan, Canada, Spain and Italy. The number of American-made molds is decreasing because of high prices. Electronics companies have molds and order plastic companies to produce it. Automotive companies order plastic companies to develop molds and supply plastic products. GM, Ford and Nissan T1 vendors are building molds in Korea and shipping them to Mexico.

The CEO of SEI was interviewed about plastic industries in Mexico. Plastic companies entered Mexico with large home appliance, electronics and automotive companies to supply plastic parts. First, plastic product suppliers are international companies and domestic plastic companies are second and third suppliers. Plastic product industries are moving from China and the U.S. to Mexico. Payroll is 11 percent cheaper, but for plastic injection machines, molds and plastic materials, importing is more expensive than in Korea, Japan, China and the U.S.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 243 1.2.3.3. Plastic, KOH-MEX and H&J Mold at Monterrey

KOH-MEX was established in 2001 at Monterrey to supply plastic parts of refrigerators to LG Electronics by Teasung Precision (tsmould.com), a mold company in Korea. The company has a plastic parts factory and mold maintenance tool shops. A Korean engineer and domestic technicians repair molds used by LG in Monterrey. Facilities and equipment include CAM, NC machine tools, milling, lift for assembly and EDM. The engineer said molds are developed and imported from Korea because the standard mold of Mexico was not developed well, adding that development time takes two months, or twice as long as a Korean mold maker that uses a standard mold base.

The engineer of H&J molds, who started repair in 2002, also said mold making is not a good business in Mexico because of expensive material cost, weak standards for mold base suppliers and high cost infrastructure. But maintenance companies do good business because plastic injection molds should be repaired often after being used five years.

1.3. University and Training Center in Chihuahua

1.3.1. Chihuahua Institute of Technology

Chihuahua Institute of Technology was established in 1948 and 23,000 students are studying at its eight campuses. The Chihuahua campus has 230 faculties and 5,280 students. Undergraduate programs are mechanical engineering, electromechanical engineering, electrical engineering, electronic engineering, electronics and materials, chemical and industrial and business. Graduate programs are offered in business, manufacturing and electrical engineering. The doctoral program has just electrical engineering. The university is not good at teaching die and mold production because the manufacturing training equipment is really old and faculty lack industrial experience.

The quality of students is high enough to conduct engineering analysis of the manufacturing process. Undergraduate students can learn die and mold design required to understand plastic materials, fluid mechanics, heat transfer, solid mechanics and molding process. Co-teaching by faculty who teach mechanics and mold-making engineers who teach mold design technology is required. Engineering analysis of die casting, plastic injection molding and metal deforming is a good research topic for graduate students. The team of university, training center and mold makers can apply mold development research funding from CNACET. The Chihuahua government will also support students who apply to foreign universities to learn engineering analysis of the casting and molding process to learn advanced

244 • 2014/15 Knowledge Sharing Program with Mexico international molding technology.

1.3.2. Technological University of Chihuahua

Technological University of Chihuahua (TUC) offers a two-year technology education program in maintenance, automotive, energy, telecommunication and industrial technology. The role of the university is finding industrial requirements and training students in the technology needed to work at manufacturers in Chihuahua. The education program includes automotive and plastics subjects required in the automotive sector of Chihuahua. Leading research and technology transfer to industry are weak, but good at teaching technology using teachers from industries.

TUC can teach die and mold making technology if supported by teachers with the proper knowledge because it has good training equipment required to make molds and test the plastic injection process. Facilities include milling, lathe, CNC milling and machines for grinding, electric discharge and plastic injection required to make molds. The university also has a good system of bringing in teachers from industry. A mold-making engineer of Mexico is the best teacher and a professor from Korea Polytechnics or a mold engineer is the second solution because they should use a Korean-Spanish interpreter to teach students.

1.3.3. Polytechnical University of Chihuahua

Polytechnical University of Chihuahua (PUC) is running a three-year engineering program. All students must get industrial practice every year. The university is focused on assembly and aerospace industry that is important to Chihuahua, but has little relations to the die and mold sector compared to cars.

1.3.4. CENELTEC

CENELTEC (Centro de Entrenamiento en Alta Tecnología) is a technology training center that international companies use to educate newly hired workers. Teachers in the aerospace sector teach assembly technology to new employees of 20 international aerospace companies. There are good CAD/CAM (CATIA, NX), about ten machinery centers (Makino, Hass), ten turning centers, one wire electric discharge machine and two plastic injection machine useful for mold making, and center teachers have developed a basic mold-producing plastic box. A teacher has worked at a mold repair company and developed two basic molds producing rectangular plastic boxes at CENALTEC. But the technology is of lower quality than the industry’s because the standard mold base was imported from the U.S., and the core and cavity were made from aluminum alloy that is easy to be machine compared to die steel and deformation after injection is not predictable. The standard mold base set was

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 245 imported from the U.S. and delivery time was two months. Questions arose over shrinkage and deformation of plastic in the injection process. The knowledge of the molding process and the technology, which predicts process results using analysis software, is required for the center.

The center is the best place to train mold technicians and incubating die and mold making companies because of the high-quality machine tools and design software for mold machining. The center’s weak point is the knowledge of mold- making engineers. The cooperation at the center, which has the best facilities, and mold makers with knowledge will be a good way to change CENALTEC from a technology training center to a mold incubation institute. If a Korean mold design and production engineer does business with the equipment, the domestic plastic company can develop automotive parts and supply to OEM companies and technology will transfer to a teacher of CENALTEC. But the equipment cannot be used for business because 60 percent of funds came from the federal government and 30 percent from Chihuahua. A law is needed to start the cooperation by allowing rental of equipment at low cost to domestic companies if they develop a mold.

[Figure 5-6] Chihuahua Institute of Technology and CENALTEC

246 • 2014/15 Knowledge Sharing Program with Mexico 2. Korea's Experience in Metal-mechanics SMEs 2.1. 60 Year History of Korean Dies & Molds

2.1.1. 1950s LG Chemical

A lot of weapons were produced via dies and molds in Busan after the Korean War broke out in 1950. The people there with mold technology went to Seoul and started to produce dies after the war.

Tungsten carbide is a cutting tool material discovered in Gangwon-do in 1916. Korea Tungsten Co., Ltd. (taegutec.com) was established by the government in 1952. The state-run enterprise employed 4,287 workers and exported US$16 million a year, or 56 percent of national exports. ISCA bought the company and renamed it TaeguTech in 1998, which has since become a global leading cutting tool companies along with YG1 (yg1.co.kr).

LG Chemical (lgchem.com) started to make plastic injection molds for cosmetic containers with machinery facilities imported from Germany in 1957. The company became the largest of its kind in Korea in making plastic materials from raw oil and supplying the materials to plastic part producers.

Companies producing final products imported mold or made simple molds themselves with basic machinery facilities. No company in 1957 had as its main business die and mold making. The country’s first mold company was Hanjin Die and Mold Co., Ltd. (hanjinmold.com) established in 1958 and Jeilmold (jeilmold.co.kr) followed in 1959.

2.1.2. 1960s LG Electronics, Injection Machine, Lathe

Die and mold technology required to produce a lot of the same parts was developed together with the rapid growth of Korean manufacturing after six years of an economic development plan started in 1962. Simple molds were first designed and made with lathe and milling machines. Lucky Goldstar (LG Electronics) designed and made dies and molds itself to produce radios and household appliances, and engineers who studied mold design and production technology in the company founded their own small mold companies and improved mold technology.

The plastic injection machine for the process and the machine tool for mold machinery were developed in Korea. Dongsin Hydraulic (dongshin.net) produced a

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 247 domestic plastic injection machine in 1969. Whacheon (hwacheon.com) developed Korea’s first lathe and became the nation’s largest machine tool company specialized in mold production.

[Figure 5-7] 1st Lathe and 2014 machinery center of Whacheon

2.1.3. 1970s Korea Polytechnics II, Standard Mold Base, EDM

Plastic injection molds and stamping dies for mass production of electronic and automotive parts were made mainly as the electronics and automotive industries grew in the 1970s. Kishin Precision (kishin.com) cooperated with Japanese mold base maker Futaba and started to supply standard mold bases to the mold industry in 1975. Most mold makers use a standard mold base from Kishin to reduce costs and development time. Jinyeong Precision (kojin.co.kr) developed an electric discharge machine used to make deep swallow geometry by melting hard mold steel with copper electrode in 1979. Jinyeong is the largest electric discharge machine company in Korea.

A die and mold education center was established at Korea Polytechnics VII in Busan with the help of the German government in 1972. The die and mold department was opened at the school (incheon.kopo.ac.kr) in Incheon in 1974. Korea Polytechnics has had job training centers that run a two-year die and mold course today.

The government established about 200 technical high schools in every province (do) and big city to supply metal working technicians to industry. Most managers and CEOs of mold companies have been trained in basic machinery techniques at technical high schools.

248 • 2014/15 Knowledge Sharing Program with Mexico 2.1.4. 1980s KODMIC, InterMold

The number of die and mold companies increased rapidly and exports to Japan and Southeast Asia started in 1980. The complex surface design was able to have the same machinery as the CAD design with CNC machine tools.

Korea’s die and mold industry cooperative (koreamold.com) was established in 1979 and held the country’s first international die mold and related equipment exhibition named InterMold Korea (intermoldkorea.com), now an biannual event. InterMold Korea 2015 was held at KINTEX in March 2015.

2.1.5. 1990s Trade Surplus, CAD/CAM

The Korea Die and Mold Industry Cooperative (KODMIC) joined the International Special Tooling & Machining Association (ISTMA) in 1990. At this point, the 3-D CAD/ CAM software began to be used for mold design and manufacturing.

The amount of die and mold exports in 1994 was US$210 million, which exceeded imports of US$190 million for the first time. Korea became a major exporter of dies and molds, but as Japan transferred technology to Korea, exports to Japan remained lower than imports. The amount of exports to Japan in 1998 exceeded that of imports US$140 million to US$60 million.

2.1.6. 2000s World’s Second-largest Mold Exporter

Korea now possesses advanced mold technology to produce most dies and molds used in cars, electronics and optics. Small and medium die and mold companies are making plastic injection molds, press molds, die casting mold for a variety of fields and supplying them to domestic and foreign companies.

Such exports have increased 16 percent every year from 2010, and Korea became the world’s second-largest mold exporter in 2014. The export quantity was US$3,228 million and imports were only US$158 million in 2014.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 249 [Figure 5-8] 60 years of Korean die and mold history

2000s Huge mold for automobile, Precision mold for electronics, 1,379 die/mold companies. Export $3,228 million>>Import $158 million in 2014 1990s CAD/CAM & CNC, Wire EDM, Tungsten carbide tool, Die steel Export $210 million>import $190 million in 1994 1980s NC machine tools, Korea Die & Mold Industry Cooperative (KODMIC) 1970s Electric discharge machining, Standard moldmase, Die & Mold triaining school (Polytechnic Ⅱ) 1960s Milling & lathe (whacheon.com), Injection molding machine (dongsin) 1950s Korean war, LG chemical, TaeguTec, 1st Die & Mold companies started business

[Figure 5-9] Die & Mold Exports and Imports of Korea over 20 Years

Million $ 3500 3,228 3000

2,676 2500 2,512 2,248 2000 Export 1,766 Import 1500 1,452 1,223 1000

500 616 190 164 139 210 151 140 135 140 152 68 68 158 0 17 123 1985 1990 1994 2000 2005 2009 2010 2011 2012 2013 2014 year

2.2. Status of Korean Dies & Molds

2.2.1. Production and Location

Production volume for companies with 10 or more employees was US$7,147 million in 2013. The average growth rate was 8 percent from 2009 to 2013. The portion of plastic molds and press dies was 75.2 percent. Output of plastic molds was US$2,948 million and that of stamping dies US$2,385 million in 2012. The average growth of plastic molds was 10 percent and that of press dies 8.7 percent.

250 • 2014/15 Knowledge Sharing Program with Mexico [Figure 5-10] Production by Die & Mold Companies in 2012 (Unit: million US$)

Standard Parts Other 740 888 Plastic Molds Die casting Molds 2,948 129

Press Dies 2,385

Total $ 7,086 million in 2012

Source: Statistics Korea, “Statistical Survey Report on Mining and Manufacturing,” 2013.

Korea in 2006 had 2,600 die and mold companies that each employed more than five people, and the average number of employees was 15. Most die and mold companies were small size.

In 2012, 1,379 die and mold companies employed more than 10 people, mostly around Seoul, Busan, Ulsan and Daegu, where the major companies produce electronics, housing equipment and cars. About 53 percent of die and mold companies were concentrated in Seoul, Incheon and Gyeonggi-do surrounding the two metropolises. The number of companies located in Gyeonggi-do was 509, Incheon 145 and Seoul 85. About 21 percent of die and mold companies were located in the country’s southeastern region, where the automotive industry is located. The number of die and mold companies in Busan, Ulsan and Gyeongsangnam-do was 289. About 14 percent of die and mold companies were located in central Korea, where electronics companies are located. The number of companies in Daegu and Gyeongsangbuk-do was 202. About 6 percent of companies (81) were located in Gwangju and Jeollanam-do, where the mold industry complex is.

The number of metal mechanical manufacturers of metal and rubber parts, plastic products, electronics, home appliances, machinery and cars was 45,196 in 2013 per a 2013 statistical report on mining and manufacturing. The number of die and mold companies was about 3 percent of metal mechanical companies in Korea based on upper statistics. The regional distribution of metal mechanical and die and mold companies was proportional to the number of companies compared. Seoul was 3 percent, Incheon 8 percent and Gyeonggi-do 36 percent, or similar to the ratio of die and mold companies. Busan, Ulsan and Gyeongsangnam-do were 22 percent and Daegu and Gyeongsangbuk-do13 percent, also similar to the number of die and mold companies. The number of metal mechanical companies of Chihuahua will be a good statistic to predict the ideal number of die and mold makers.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 251 The number of first suppliers of automotive sub-assembly products to automotive companies was 898 in 2013, per Korea Auto Industries Cooperative Association.

No. of Die & Mold Makers, Metal Mechanical Enterprises and 1st auto suppliers

Die & Mold Metal Mechanical Region 1st Auto Suppliers Companies Enterprises

Seoul 85 (6.1%) 1,520 (3.4%) 35 (3.9%)

Incheon 145 (10.5%) 3,636 (8.0%) 58 (6.5%)

Gyeonggi-do 509 (36.8%) 16,110 (35.6%) 201 (22.4%)

Daegu and 202 (14.5%) 5,709 (13.0%) 113 (12.5%) Gyeongsangbuk-do

Busan, Ulsan, and 289 (20.9%) 9,943 (22.0%) 263 (29%) Gyeongsangnam-do

Total 1,379 (100%) 14,596 (100%) 898 (100%)

Source: Korea Die and Mold Industry Cooperative, 2013. Statistics Korea, 2013 Statistical Report on Mining and Manufacturing. Korea Auto Industries Cooperative Association, 2013.

[Figure 5-11] No. of Die & Mold Companies, 2012

Gangwon Seoul 2 (0.1%) 85 (6.1%) Incheon 53.3% Companies are locating nearby Seoul 145 (10.5%) Gyeonggi 509 (36.8%) Chungbuk 20 (1.4%) Daejeon Chungnam 32 (2.4%) Daegu Gyeongbuk 202 (14.5%) Jeonbuk 20 (1.4%) Busan Ulsan Gyeongnam Gwangju 289 (20.9%) Jeonnam 81 (5.9%)

Source: Korea Die and Mold Industry Cooperative, 2013.

252 • 2014/15 Knowledge Sharing Program with Mexico 2.2.2. Export and Import of Dies & Molds

Korea exports about 37 percent of its die and mold output, with outbound shipments worth US$3,228 million and imports of US$158 million in 2014. The export figure marked a rise of 20.6 percent from US$2,675 million in 2013. Korea exported dies and molds to China, Japan, China, India and Vietnam and also to the U.S. and Mexico. The export volume ratio was about 63 percent in Asia and 7 percent in Mexico.

Korea was the world’s second-largest die and mold exporter in 2014, trailing only China, which exported US$4,926 million in 2014. Korea exported US$3,228 million, Japan US$2,908 million, Germany US$2,553 million and the U.S. US$1,431 million.

The three major die and mold customers were the U.S. with imports worth US$3,093 million in 2013, Mexico US$2,630 million in 2012 and China US$2,599 million in 2013. Mexico imported US$600 million from the U.S., US$264 million from Japan and US$212 million from Korea in 2014.

Korea is the world’s No. 2 mold exporter and Mexico is the world’s second-biggest buyer of molds. Korea exported dies and molds to Mexico worth US$212 million in 2014, or about 8 percent of all imported molds in Mexico.

Mold Exports of Korea (Unit: US$ million)

1. China 563 6. Vietnam 191 2. Japan 535 7. Taiwan 131 3. India 282 8. Malaysia 108 4. USA 241 9. Russia 107 5. Mexico 212 10. Turkey 106

Source: Korea Die and Mold Industry Cooperative, 2014.

Major Mold Exporters and Importers

Export country US$ million (2014) Import country US$ million (2013) 1. China 4,926 1. USA 3,093 2. Korea 3,228 2. Mexico 2,630 (2012) 3. Japan 2,908 3. China 2,599

Source: Korea Die and Mold Industry Cooperative, 2014.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 253 [Figure 5-12] Die and Mold Exports of Korea

Source: Korea Die and Mold Industry Cooperative, 2014.

[Figure 5-13] Major Mold Exporters and Importers

Export Import million $ million $ 4,500 4,500 4,000 4,000 3,500 3,500 3,000 3,000 2,500 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 500 0 0 China Korea Japan Germany USA USA Mexico China

2.2.3. Industries Needing Dies and Molds

The number of Korean die and mold companies increased with the development of the country’s automotive and electronics industries using molds for mass production. Mold demand is consistently increasing in cars, home appliances and communications. Mold exports grew when buying companies built their factories abroad. Mass production business that consumes molds affect die and mold companies of Korea.

Samsung Electronics and LG Electronics are heavily affecting Korea’s mold business because they order a large number of molds when developing new refrigerators,

254 • 2014/15 Knowledge Sharing Program with Mexico air conditioners, washing machines, TVs and laptop computers. Two big companies entered the mold business again to protect their designs because the first step in new model production is mold making. Samsung and LG, who split its mold development division into the mold company ASIS (asis.co.kr) and Nara Mold & Die Co., Ltd. (naramnd.com) because of low profit in the 1990s, rebuilt die and mold factories and made molds for electronics and smartphones in 2010 to protect their new designs.

The world’s six leading home appliance manufacturers are China, Japan, Mexico, U.S., Malaysia and Korea, according to a yearbook of world electronics data. All six countries are also global leaders in mold manufacturing except Malaysia and Mexico, who has a prime opportunity to develop its mold industry.

Korea’s die and mold market gets enlarged when Hyundai-Kia Automotive Group develops new designs because the molds used to produce metal and plastic parts are developed by die and mold companies. The quality and reliability of dies and molds are important because carmakers share part of the production process design with suppliers and the companies develop molds for production.

Korea in 2013 was the world’s fifth-biggest carmaker. The number of first suppliers of automotive subassembly products to carmakers was 898 and the yearly sales of the Korean automotive parts industry was US$68 million in 2013 according to KAICA (Korea Auto Industries Cooperative Association). About US$2.4 billion (34.2 percent) in dies and molds were for the automotive industry according to KODMIC. The market size for dies and molds for cars was an estimated 3.6 percent of automotive parts production volume if based on statistics of KAICA and KODMIC.

[Figure 5-14] Industries Needing Dies & Molds

Source: Survey on mold industry, Korea Die and Mold Industry Cooperative, 2012.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 255 2.2.4. Base Industry of Dies & Molds

Machine tools and material technologies that support the die and mold sector are well developed with customer industries. NCBrain software simulates NC machinery and higher productivity by optimization of machinery conditions, and became a standard for mold makers that want to safely run the NC machine tool overnight and reduce machine time. The machinery center of Whacheon and CNC electric discharge machine of Jinyeong Precision have the largest market share in Korea. POSCO produces high quality die steel and Kishin (kishin.com) supplies standard mold base that sets fast and has a low price. Bukwang Tech (bkind.or.kr) supplies standard components of plastic mold and stamping dies. TaeguTec (teagutec.com) and YG1 (yg1.co.kr) make tungsten carbide tools that can cut hard die-steel fast.

LG Chem (Chemical) and Samsung are producing raw plastic materials and supplying them to plastic injection mold companies. Dongshin Hydraulic (dongshin. net) and LS are making plastic injection machines for plastic companies. POSCO (posco. co.kr) produces high quality sheet metals and SIMPAC (simpac.co.kr) makes hydraulic press machines used for bulk metal forging and sheet metal stamping.

[Figure 5-15] Base Industry of Dies & Molds

asis.co.kr

CAD / CAM Precise Machining Production

Simulation Noldbase NC Machining Plastic Injection NCBrain.com Kishin.com hwacheon.com lgchem.com dongshin.net

endmill EDM Sheet metal Press taegutec.co.kr kojin.co.kr posco.co.kr simpac.co.kr

256 • 2014/15 Knowledge Sharing Program with Mexico 2.3. Korea Die and Mold Industry Cooperative

2.3.1. Members

KODMIC (Korean Die and Mold Industry Cooperative) was started in 1980 and had 553 member companies in 2014. KODMIC (koreamold.com) has 235 member companies in plastic injection molds, 120 in stamping dies, 12 in die casting molds, 16 in other kinds of molds, 95 in standard parts and die steel, and 75 related to the mold industry. The majority 81.2 percent of member companies are located in the industrial area around Seoul. 52.1 percent in Gyeonggi-do surrounding the capital, 15.1 percent in Seoul, and 13.6 percent in Incheon.

KODMIC suggests government policies for the development of the industrial complex and technological advancement of die and mold companies. InterMold Korea, the world's first die and mold-specialized exhibition, has been held every odd year since 1981. Member companies who want new customers attend trade exhibitions in major countries with financial support from the government and the association. KODMIC participates in ISTMA and Federation of Asia Die and Mold Association (FADMA).

2.3.2. InterMold Korea

InterMold Korea (intermoldkorea.com) was held for the first time in 1981 and is Asia’s leading exhibition for dies and molds, just as EuroMold is in Europe. InterMold Korea 2015 was held March 10–14 at KINTEX (Korea International Exhibition Hall) near Incheon International Airport. The combined space is 32,000㎡ and 400 companies participated from 25 countries. More than 55,000 buyers from the die and mold sector and its related industries visited for marketing and seeing leading global technologies. InterMold Korea is held together with exhibitions of KOPLAS (Korea International Plastic and Rubber Show) to maximize synergy effects and provide market opportunities for all related industries.

2.3.3. Partnership between KODMIC and TUC

The chairman of KODMIC suggested cooperation between Korea mold makers and Technological University of Chihuahua (TUC) in Mexico. He visited Mexico with 20 mold makers to meet customers there in 2014 and learned the requirements of the data on plastic and sheet metal companies. TUC had good space and facilities, but lacked teachers of die and mold technology. The Korean mold maker has the world’s best technology in the field and wants a maintenance center in Mexico. It said TUC and Korean mold makers would make a great couple. The university offers equipment and gets technology from Korean mold makers, who use the facility and

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 257 teaches teachers and students about advanced mold technology.

An engineer from a Korea mold maker teaches advanced technology to teachers and students at TUC in the first step. He also earns the Korean mold maker profit with mold maintenance service using the space and equipment on campus. This policy is not risky because nobody spends financial funds in the first step, and this is run well at universities near automotive and home appliance industries like as TUC.

The Korean mold maker will directly build factories and buy facilities for mold maintenance if the number of customers rises enough in the second step. Students learn about dies and molds at the university and are hired by the company. Maintenance companies will serve as domestic mold makers that design and produce molds in Chihuahua if a large order is received.

Chihuahua mold engineers who studied at TUC when mold makers taught and did maintenance at the campus and worked at the mold maker for about five years, start working at the mold making company in the third step. At this stage, low- interest bank loans are used to build factories and buy equipment.

The cooperation of the Korean mold maker and TUC benefits both sides and is not risky, though it can stop in any stage if nobody pays funds.

2.3.4. Mold Valley and Korea Mold Center

Bucheon, a suburb of Seoul near Incheon, has 867 mold companies and is the largest mold city of Korea. Bucheon built the mold industrial complex ”Mold Valley” in 2009, covering 290,884㎡ and with a land development cost of US$171 million from March 2007 to June 2009. The city sold developed land to 65 mold companies and nine related companies that employed a combined 2,000 people. The 74 mold makers and related companies bought the developed land and built the building using financing from bank loans. The companies expect to use expensive common testing equipment of the Korean Mold Center, which will be established in 2017 at the center of Mold Valley.

The center is under construction in the middle of Mold Valley, with an area of 11,758㎡. The four-floor building area will take up 9,036㎡. The development cost is US$56 million paid for by the Korean government (US$24 million), Gyeonggi-do (US$5 million), Bucheon (US$24 million) and private companies (US$3 million). The funds will be used for the land (US$19 million), buildings (US$13 million) and equipment (US$24 million). The construction period is 2015 to 2017. The function of the center is production testing, technology development and training and creation of a mold hub.

258 • 2014/15 Knowledge Sharing Program with Mexico [Figure 5-16] Mold Valley and Korea Mold Center

2.3.5. Mold makers

Mexican government officials and professors visited Ilwoo Precision, NCBrain and Keonwoo Precision in Korea.

Ilwoo (iwmold.com) in Mold Valley is a maker of plastic injection molds that started with just molds but extended into product design and customer sales. The CEO designed the most complex mold of the company himself and started his company after working at a mold maker for 15 years. In general, a technician with more than ten years in the mold industry often sets up a private company because of the outsourcing nature of the mold business and low interest loans. The factory is a seven-floor building used for mold making, plastic injection, design and research, assembly and marketing.

NCBrain (ncbrain.com) in Mold Vally is a software developer in Korea and made a standard system for mold machinery simulation and optimization. Korean mold makers want to increase the speed of NC machinery and run an expensive machinery center overnight safely without workers. The software computes cutting load during machine simulations, regulates speed to increase productivity, and repairs errors in NC data for safe use. The company also developed the five-axis machinery simulation software NCBrain5X and the machinery center protection system NCBrain EYE.

Keonwoo Precision (mould.co.kr), established in 1990, has as its CEO the chairman of the Korea Die and Mold Industry Cooperative. Keonwoo is also an SME like other mold makers with capital of US$6.4 million and employing 50 staff. The main customers are 13 Japen plastics companies supplying parts for cars (70 percent) and electronics (20 percent) in Germany, U.S., Finland and Spain. Producers of instrument

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 259 panels in Mexico are customers of Keonwoo Precision.

2.3.6. Outsourcing Culture of Mold Makers

Korean mold makers prefer minimum capacity to do all processes in a company and outsource overflowing orders with smaller partner companies. If a mold maker gets a customer’s plastic design, the type and size of the mold are decided and the order standard mold base is sent to Kishin. The mold is designed by a veteran staff of the company who started his mold design company in a small office and NX software. After a weak mold design is finished, a standard mold base is sent to the mold maker.

The core, cavity and complex slide core are sent to a private company that also works with the mold maker and started an NC machinery business with Whacheon machinery center and CAM software. A cooling hole is drilled in a company doing business with one gun drill machine. Thin and deep geometry is made up in a company having one single electric discharge machine. The machined parts are polished by partner companies specializing in polishing technicians.

The mold maker assembles the mold and test plastic injection process with a Woojin injection machine and sends the sample to the customer in a month. If an error needs correction, the mold is sent to a company for argon gas metal inlet arc welding.

[Figure 5-17] Outsourcing of Special Processes and Standard Parts

Mold maker Outsourcing Standard

Mold design Mold design Standard mold base Standard elements

NC Machining NC machining Gun drill

EDM EDM

Polishing assembly Polishing

Test injection

260 • 2014/15 Knowledge Sharing Program with Mexico Small outsourcing companies only did mold design, NC machinery, electric discharge machinery or polishing, reducing cost and increasing specialized technology in Korea. The companies closed after mold demand decreased in Japan. China’s mold business is led by large mold makers rented with enough government funds. The mold business model of Mexico can follow Korea’s strategy of using small companies or China’s way of using large companies.

2.4. Die & Mold Department at Korea Polytechnics II

2.4.1. Korea Polytechnics II

The Korea Polytechnics system has eight main campuses and offers two-year technology education programs. The leading campus is Korea Polytechnics II in Incheon, home to many die and mold companies.

There are 12 departments and 2,200 students at Korea Polytechnics II, which stresses practical technology education for two years. Those who studied at technical high schools or got low grades in general high schools studies here and go on to work at small and medium companies after the two-year program. Full training and education programs are offered at the campus because it has enough facilities for training students.

Departments for dies and molds, cars, electronics, mechatronics and IT run after-work education programs for factory workers. This is a third and fourth-year program for graduates of the two-year program and involves learning theory and new technology. The tuition is paid by students supplemented with a government scholarship. A short-term training program is also available for workers or the unemployed looking for jobs.

Technological University in Mexico is running a dual education system like in Germany, as in learning at school and industry together for two years. This makes students more familiar with industry and increases focus on education. Korea Polytechnics has offered technology and math and science courses at the campus, and the dual education program of the die and mold department began in 2014.

2.4.2. Department of Die & Mold Design

The die and mold design department is the largest and leading department of Korea Polytechnics II. The department was started in 1974 to teach mold technology at a job training center established in 1968 that eventually became Korea Polytechnics II.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 261 The number of department students is 90 studying plastic injection molds, press dies and special mold design. The two-year program offers day classes, with students learning plastic injection molds, stamping dies, mold materials and mold manufacturing and practicing basic machinery, CAM, NC machinery, assembly and repair. The team project of designing a product requires development of a mold and production of a product through the mold. This continues over three semesters before a student graduates.

Students can continue learning in their third and fourth years at the department Monday and Wednesday evenings and Saturday mornings while working at a company by day. A short-term technology training program is also offered for company staff or the unemployed to help small companies find workers.

Teachers working at mold companies are teaching practical technology, and education from only full-time professors is insufficient. Since the education programs are developed by industry and university, 60 percent are practical technology training and 40 percent are related to math and science. All students form a group and develop dies or molds over 18 months in project course work I, II and III to graduate. Not only the students but also staff who controls CAD/CAM and machinery facilities at university spends a long time to design and make molds. The sheet metal parts are produced by students’ dies and the plastic parts are produced by molds designed and made by students themselves.

Courses at Department of Die & Mold Design

Semester Lecture Practice Injection mold Basic machinery Stamping die NC machinery 1st Precise metrology 3d modeling Mold drafting CAD practice NC machinery Mold manufacturing Mold development project 1 2nd Mold material CAM practice Product design and post process Precise part machinery Precise mold design Mold development project 2 Precision machinery Mold manufacturing 3rd Mold element design Mold design Product design Mold development project 3 Assembly and repair 4th High speed machinery Precise mold manufacturing Process analysis

262 • 2014/15 Knowledge Sharing Program with Mexico 2.4.3. Professor Exchange with Chihuahua

Chihuahua’s economic counsel suggested exchange of students and professors in a meeting at Korea Polytechnics II. He wanted to send students to the Department of Die and Mold Design for one month to learn mold design. Korea Polytechnics has trained students from Asia, U.S. or underdeveloped African countries via funding and assistance from Korean governments.

Technological University of Chihuahua has enough buildings and machinery, but teachers lack experience in the die and mold industry. Chihuahua suggested sending professors to TUC and Korea Polytechnics accepted because all professors get six months or a year sabbatical every seven years. Professors at Korea Polytechnics with enough experience in die and mold education can teach teachers and students in Chihuahua while on sabbatical if the Chihuahua education minister offers an interpreter.

[Figure 5-18] Department of Die & Mold Design at Korea Polytechnics II

2.4.4. Technical High School of 1970s

Most veteran mold technicians, CEOs of a small mold makers and the leader of the Korea Die and Mold Cooperative all graduated from technical high school in the 1970s. The government has attracted young students to technical high school through the offer of free tuition. They received training in basic milling, lathe, polishing and draft for two years, then learned mold making through practice at

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 263 an SME, and finally started their companies in the 1990s. The companies started by graduates of technical high school 40 years ago made Korea the world’s No. 2 exporter of molds.

Chihuahua also has technical high schools and their students are as smart as those from 40 years ago in Korea. Let them choose mold companies despite being at a disadvantage to big OEM companies and achieve their dreams of starting businesses.

3. Advisory Research Results 3.1. Implications of Korea’s Experience

3.1.1. Implications of Korea's Experience in Die & Mold Industry

Korean die and mold companies started with their domestic automotive and home appliance industries, and have grown up together. Machine tools, press machines, plastic injection machines, die steel and plastic material that support the die and mold sector also have grown up with other industries in Korea. Korea became the world’s third-largest mold exporter after China and Japan because of Korean demand and its platform industry.

Industry in Chihuahua is being developed rapidly by international automotive and aerospace companies who built part production and assembly lines there, but they are importing dies and molds from the U.S. or China. The standard mold for mass production technology is required to develop metal mechanical parts for supply to international companies. Domestic mold companies that are not competitive with foreign counterparts are surviving through the mold repair business. Government policy and matchmaking with international mold makers need to encourage the supply of domestic molds or metal mechanical parts to international companies in Chihuahua.

3.1.2. Implications of KODMIC’s Experience

KODMIC is a group of die and mold companies that communicates with governments and foreign companies instead of small private businesses. Cooperation, competition and specialization comprise a method to reduce prices and improve technology in the Korean mold sector. KODMIC proposes public policies to government and buy a large volume of die steel from POSCO together. Competition also occurs when orders are received from plastic companies because all information on member companies is listed in the KODMIC homepage. Small companies that use fewer than five people do business with specialized technologies required by

264 • 2014/15 Knowledge Sharing Program with Mexico mold makers but not used every day. The association of mold makers and specialized companies is a buffer that absorbs too small or too large orders in a short time.

SMEs that do not conduct cooperation, competition and specialization inside of Chihuahua find it difficult to survive against international businesses. A policy to increase the number of small companies to compete against and cooperate with each other is required.

The chairman of the Korea Die and Mold Industry Cooperative said Korean mold makers want a mold maintenance center in Mexico to increase market share. The need of Korean mold makers is an opportunity for Chihuahua. Companies based in Chihuahua weak in international cooperation can become partners of the cooperative and establish joint companies if the partnership is strong and the number of customers is enlarged.

Bucheon, a city where mold makers are concentrated in and the location of Mold Valley, will establish a mold technology center that rents expensive equipment to small companies. A Chihuahua version of Mold Valley can be developed around CENALTEC and domestic mold companies can rent quality machine tools and software from the center.

3.1.3. Implications of Korea Polytechnics’ Experience

Korea Polytechnics started as a technology training center where mold makers learned technology from Germany and Japan. The university’s department of die and mold design is the biggest at the school and supplies new workers to thousands of mold makers.

Technological University of Chihuahua has facilities as good as Korea Polytechnics’, and can open two-year programs for mold technology. The program of Korea Polytechnics will be a role model for TUC and the mold education experience of professors can be transferred to Mexican teachers by the professor exchange program.

3.2. Policy Recommendations

3.2.1. Policies to Foster Die & Mold SMEs

A. Principles

Molds in Mexico are more expensive than imports sometimes because of limited infrastructure and the small number of mold makers that import a small volume of

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 265 die steel and standard elements at high prices. To resolve this problem, mold repair and maintenance should be active in Mexico over the short term. Domestic mold companies will learn the skills from the repair experience and gain mold technology experience. Standard elements and die steel should be supplied inside Mexico or from the joining a program with the Korea Die and Mold Industry Cooperative in the worst case. It is important that these economic activities happen naturally in the Chihuahua market for mold maintenance.

Cooperation, competition and specialization are basic requirements for reducing costs and increasing technology. Mexican businessmen should collaborate and compete to succeed in their domestic market. Only the best from Chihuahua can compete in the international market.

If the Mexican government allows the mold sector to operate under a free economy, domestic die makers will not survive international competition because their molds are expensive and of low quality compared to Asian ones. Asian governments back their respective mold industries through public bank loans for their companies building factories and buying machine tools. The Chihuahua government needs policy to support mold makers with funding or promote public facilities at universities and training centers.

B. Short-term Policy for Mold SMEs

1) Mold SMEs Competition and Specialization

Chihuahua City has a mold developing company, a mold repair company and three machinery companies. The mold maker failed in international competition because of no competition between SMEs in the region. The mold maker, mold repair company and machinery companies lack the knowledge to develop molds. This closed system increases prices and secures the market at the local level, but fails at the international level.

In Korea, however, thousands of mold makers compete and only the strongest companies survive. The glut of mold makers have decreased prices and increased the quality of Korean molds, forcing mold makers to explore global markets.

Chihuahua needs more than three mold makers that can develop molds by themselves, as well as more element processing companies. Higher competition there will decrease prices and increase technology, two traits needed in international competition.

Korea molds are developed not only by one mold maker. Though one company

266 • 2014/15 Knowledge Sharing Program with Mexico has design, machinery, assembly and testing engineers and equipment, it outsources mold design, standard mold base, gun drill, NC machinery, electric discharge machinery and polishing. The cooperation of related SMEs increases production volume and reduces the risk of mold makers.

2) Mexican Mold Industry Association

The Korea Die and Mold Industry Cooperative is a role model for association of small mold makers. A Chihuahua mold cluster and a Mexican mold industry association should be established and the list of technology, phone numbers and addresses should be shared and distributed to plastic companies in Mexico. The list will promote cooperation that enlarges the mold manufacturing capacity of Chihuahua. The list distributed to plastic companies will give opportunities for domestic mold makers to compete abroad.

When company members import large volumes of die steel and standard elements together, they save costs than if they bought small volumes. The Korea Die and Mold Industry Cooperative buys large volumes of die steel from POSCO to decrease prices.

Mold-making engineers should teach other company members how to design, make and use molds. Cooperation happens when related companies have the same knowledge of the molding process. Mold design, NC machinery, electrode machinery and electric discharge machinery are done by small companies that cooperate with mold makers, and such companies have learned mold development over five years and started small businesses in Korea.

Common knowledge is built when a mold maker in Chihuahua shares its knowledge with related SMEs through a training program of CENALTEC. Mold repair engineers at the tool rooms of international companies are also good teachers to domestic mold makers. Die and mold technology located at the mold maker and tool room of die casting companies should be spread to relate SMEs through a Chihuahua mold cluster and CENALTEC.

3) International Mold Exhibition in Mexico (MoldMex 2016)

The international mold exhibition in Mexico will allow domestic mold companies to find suppliers of standard elements and plastic companies that will become customers of mold makers. InterMold Korea is the best example of such an event operated by the private mold industry. The host should be a national mold association of Mexico, and the show should be opened together with a Mexican plastic association that has customers of mold makers.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 267 The exhibition also should be advertised to infrastructure suppliers who will meet mold makers. CAD software, standard mold base, standard element, CAM software, NC machine tool, cutting tool and grinding, electric discharge and plastic injection machines comprise infrastructure that should be advertised to mold makers. Makers of plastic injection machines will advertise technologies to plastic companies who are customers of mold makers. The show is where mold makers can meet support industries and potential clients together.

[Figure 5-19] Short-term Policy for Mold SMEs

Mold SMEs Mold Cluster MoldMex 2016

• Cooperation • Advertise • Mold Makers • Specialization • Joint Purchase • Element Companies • Competition • Shared Knowledge • Plastic Companies • Machine Suppliers

C. Long-term Gov’t Policy

1) Share knowledge from Technological University of Chihuahua (TUC) and CENALTEC with domestic mold SMEs

Domestic SMEs are located in the residential region, though international companies are at the industrial park. The distribution and randomness of locations restrict SME cooperation. Mold makers and related companies are located in the industrial area and cooperate in Korea.

The number of mold makers and related companies is too small to compete and cooperate. Banks in Chihuahua do not rent to SMEs or the rent is too high. The mold development business needs expensive equipment. Mold makers always answer that the banking system that rent funds for building and facilities are Korea’s best policy. A technician can start a business with small seed money because an industrial bank loans money with help from a government insurance system. The system increases the number of small companies and reduces the cost of developing mold. SMEs not supported by the Chihuahua government cannot compete against Korean mold makers, who get low-interest loans from their government.

Technological University of Chihuahua should share office and training space with domestic entrepreneurs who want to develop die and mold businesses. If more than three companies start making molds at the university, they can cooperate and

268 • 2014/15 Knowledge Sharing Program with Mexico compete for success in the market through price reduction and higher quality.

Many small and specialized companies that support mold makers should be created. Mold designers, technicians for mold and electric discharge machinery and polishing, and assembly engineers who start businesses at the university will offer specialized skills to mold makers. The specialized companies will compete to supply their technologies to mold makers and increase technology and decrease costs. Cooperation by specialized companies can also develop mold by using their technology.

TUC and CENALTEC should rent good facilities to domestic mold makers at low cost. Mold making is not a mass production business like parts production and assembly, but product R&D that starts when a company designs a new product and oversees production from start to finish. The buildings of a university and training center are prime venues for mold makers. Design software and machinery equipment of a university and training center are used only in the event of new product development. A short-term policy is to have product design and mold making SMEs located in a university and mass production in an industrial region.

2) Chihuahua Mold Valley

Mold companies that start at TUC should become independent SMEs after five years. If Chihuahua forms its own Mold Valley around the university, companies will move into the new space and cooperate with small companies inside the campus. Students who graduate from the university will join the companies and engineers of companies will teach students on campus.

The main attraction of Mold Valley is the sharing of expensive equipment among small mold makers. The automotive industry requires large molds, but domestic mold makers that have small machine tools and plastic injection machines cannot order big molds. If the Chihuahua government rents out huge machine tools, large plastic injection machines and press machines to domestic SMEs for mold making and production tests, small mold makers can get large mold orders from the car industry.

3) Mold R&D

Mold making is a creative process that develops only one mold for the mass production of the same parts. Mass production technology should not be supported by government research funding, but a single mold developed for global mass production requires a creative development process that should be supported by state research funds.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 269 Research funding given for mold development connects the industry and university automatically because research by professors and graduate students follows such funding. After the project, companies can get high-quality graduate students who can predict defects that occur after the molding process by analysis software.

The high cost of mold materials, machine tools and standard mold parts makes Mexican mold more expensive than Asian imports. The government needs to support mold infrastructure such as die steel, machinery and standard mold base over the long term to ensure sufficient supply of materials and machinery to domestic mold makers.

[Figure 5-20] Long-term Government Policy

Share Mold Valley Mold R&D

• Technological University • Near University • Mold Development • CENALTEC • Common Equipment • R&D Funding

3.2.2. Policy on Training and Education Program

A. Principles

Three institutions can offer die and mold education. Technological University in Chihuahua will run a two-year mold production technology program, Chihuahua Institute of Technology is keen on starting a mold design and engineering analysis program, and CENALTEC is ready to employ retired mold engineers from Spain who can teach mold technology and develop molds with domestic SMEs.

B. Short-term Projects at University Level

1) Mexican mold technicians are the best teachers.

Technological University of Chihuahua has a good system for learning technology from engineers who have long worked at domestic companies. Technicians who repair dies and molds at the tool rooms of international companies are the best teachers to technical university students. Mold repair is similar to mold polishing and assembly in that education comes from training. So students should be trained at domestic mold repair companies.

270 • 2014/15 Knowledge Sharing Program with Mexico The best model shows the mold repair process inside the campus like the engineering house of Korea Polytechnics. If a technical university rents space and equipment to domestic technicians who want to start their own businesses but lack funding, the technicians can show students how molds are operated and repaired.

A mold maker is in Chihuahua and several are in in Monterrey and Queretaro. Mold design engineers should teach professors at Chihuahua Institute of Technology (CIT), who in turn will teach gifted students mold design. CIT students who understand the characteristics of plastic materials and theoretical mechanics will become good mold designers if good Mexican mold engineers have extensive experience teaching professors and students mold design and the molding process.

2) Technological University of Chihuahua invites KP professor to start mold education

The mold design department faculty at Korea Polytechnics leaves campus every five years and conduct research at domestic and foreign universities, think tanks and companies. The faculty at TUC lacks mold education but wants to learn mold design and production for introduction of a die and mold program at a foreign university. Professors at Korea Polytechnics ahead of their sabbatical and those at TUC who start a mold education program will be a great match.

TUC hires professors on sabbatical from Korea Polytechnics as visiting professors for one semester or one year to learn mold education. The Mexican school can invite a visiting professor every year because about 40 faculty members are at seven die and mold design departments in Korea Polytechnics. The professor on sabbatical is allowed to work at any institution in the world. The visiting professor and his family get the opportunity to learn about Mexican culture and Spanish, and Chihuahua gets the opportunity to learn Korea’s model of mold education.

Supporting Korean-Spanish translators for the professors is important to ensure a successful exchange program. The faculty of Korea Polytechnics speak limited English because they are focused on education and training in practical technology to students. Chihuahua state hires Korean students whose major is Spanish as interns for a year to ensure communication between the Korean professor and Mexican teachers in the mold technology training course. The internship is attractive to Spanish majors if the Chihuahua education secretary officially offers roundtrip airfare and average salary conditions.

The Korean Polytechnics professor teaches how to teach mold design and production to 20 Mexican teachers, and the teachers will eventually teach 400 students every semester.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 271 3) Chihuahua Institute of Technology sends students to Gyeongsang National University in Korea to learn process analysis

Cooperation among domestic companies and the international exchange program of the private sectors are focused on technology and business that earns profit in a short time. Engineering education is a long-term plan of technology education required after five years in the Chihuahua mold industry. Future technology will come from mold design and engineering analysis required to design products and molds. Outstanding students at Chihuahua Institute of Technology are the best candidates for future mold designers and process analysis engineers because a designer should understand both mechanics and process.

Mexican students want to learn advanced metal mechanical technology at university and experience a different culture in Korea. Universities in Korea get a relatively small number of exchange students from the Americas, and want students to take short-term training courses or attend a semester exchange program.

The short-term engineering program GISPAM began in 2014, as the Mexican government sent 20 students and professors to Gyeongsang National University in Korea for three weeks. They attended lectures on mechanical engineering and practiced engineering analysis with CAD/CAM/CAE. The program will also be held in summer 2015, with Mexico and Chihuahua state sending students and professors for four weeks to Gyeongsang to learn engineering analysis and mold. Process and engineering analysis technology are not required by Chihuahua industry now, but will become important to forecast molding result when the products and molds are designed by domestic SMEs.

[Figure 5-21] GISPAM Program in Summer 2014

Source: Gyeongsang National University.

272 • 2014/15 Knowledge Sharing Program with Mexico C. Technical High School and Training Center Projects

1) Technical high school produces general technicians

Managers and CEOs of Korean mold makers learned metal machining technology at technical high schools. They were trained in basic milling, lathe, polishing and drafting for two years at technical high school and learned mold making while working at SMEs. The companies started by these students 40 years ago have made Korea the world’s second-largest mold exporter.

Chihuahua also has a technical high school and the students there are as smart as those 40 years ago in Korea. Let them choose mold companies despite being at a disadvantage to big OEM companies and help to achieve the dream of starting their own businesses.

2) CENALTEC employs retired Spanish engineers

Technology is moved by people moving from one company to another. A Chihuahua SME that employs a retired foreign engineer for three years can get international technology from him or her. The best candidate is retired mold making engineers from Spain or Portugal because they are fluent in English and the second choice is retired Asian or American engineers.

The technology training center CENALTEC can employ a retired Spanish engineer who worked at a mold company for ten years after graduating technical high school. The salary is half of that of a mold maker, a problem that needs to be resolved. The teacher can do business with plastic companies that develop molds using the center’s equipment to compensate the low salary. His or her technology will be transferred to other teachers and students while he or she does business at the center.

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 273 [Figure 5-21] Training and Education Program

Mold making Design & Analysis Technician Engineer

Korea Gyeongsang Mold Education Process Analysis Polytechnics Nat'l Univ.

Professor + Translator Summer school Domestic Tech Training Basic Mechanics SMEs

Institute of Tech Universities Technology

(a) University level

Mold making Design & Analysis Technician Engineer

Korea Gyeongsang Mold Education Process Analysis Polytechnics Nat'l Univ.

Professor + Translator Summer school Domestic Tech Training Basic Mechanics SMEs

Institute of Tech Universities Technology

(b) Technical high school and Training center

3.3.3. Policy on International Partnership

A. Principles

Korea and Mexico are natural partners in die and mold for mass production because Korea has knowledge and export capabilities and Mexico has a big market. Partnerships between Chihuahua businesspeople and Korean mold makers would earn big profits. The key is that private sector cooperation should happen only if everyone profits.

274 • 2014/15 Knowledge Sharing Program with Mexico B. Short-term Policy for Chihuahua

1) Matchmaking of domestic SMEs and KODMIC

Domestic mold makers and mold maintenance companies find it hard to get direct orders from international companies, and the three NC machinery companies lack mold development knowledge. Korean mold makers want to export molds to the huge Mexican market but do not know how to find customers since they have no office or partner there. If partnerships are formed, the reliability of domestic companies will be increased and Korean companies can get data about customers who mold plastic and aluminum parts in Chihuahua.

Customer data collection and mold maintenance are the basic roles of domestic partner companies. A company sends basic information about the Chihuahua division of a foreign company to the Korean partner, who then contacts the company to get a mold development request. The domestic companies will be introduced as maintenance partners of a Korean mold maker to international companies. If a customer asks for maintenance service for delivered molds, a Korean engineer flies to Chihuahua and tests the molds with the customer’s plastic injection machine and corrects the error at the facilities of partner companies.

Getting direct orders from international companies and making molds are the advanced roles of domestic partners. Such companies can use the mold design technology and reliability of Korean partners to get mold development requests from international companies in Chihuahua. The molds are designed by Korean partner mold makers and made by SMEs in Chihuahua. If the two companies have a long partnership and the number of customers is large, a joint company of Korea and Chihuahua will be created.

The Korean Die and Mold Industry Cooperative and three Chihuahua companies (CADISA, CBQ Technologies and HASI) signed an MOU on Korean mold makers exporting to international companies and domestic companies doing maintenance on March 12, 2015. Both parts can get the other from international companies under the name of the partner. Mexican mold businessmen also visited Korean mold makers and discussed creating profits in Chihuahua’s mold business.

2) Cooperation of SMEs, Universities and Korean mold makers

Chihuahua manufacturing depends on foreign technology because molds are imported. Mold maintenance service is needed over the short term and mold design and manufacturing technology over the long term. Mold maintenance requiring expensive equipment is a high risk to businessmen because bank interest rates in

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 275 Mexico are high and the government has no financial support program for SMEs.

Technological University of Chihuahua has hired teachers who worked at companies for a long time and offers practical training to students with good facilities. But finding teachers with enough experience for mold design education in the early stages of the domestic mold industry is difficult.

Korean companies that want to export molds to automotive and electronics companies in Chihuahua should have maintenance staff and facilities in the Mexican state. But big risk awaits given expensive facilities and equipment for a small number of companies before sufficient demand.

Chihuahua SMEs require expensive equipment and advanced mold technology, Korean SMEs have advanced mold making technology but would find it risky to offer mold maintenance in Mexico, and Technological University of Chihuahua has good facilities and space but no technician to educate on molds. All three are attractive partners who can compensate for each other’s deficiencies to create mutual benefits.

The cooperation model of Chihuahua and Korean SMEs and the university suggests that Chihuahua SMEs start maintenance service and mold making with equipment from Technological University of Chihuahua and technology from Korea mold makers.

The first step is to improve TUC rules so that domestic businesses can use facilities needed for mold making. The company founded in TUC finds it difficult to get direct orders from foreign companies because of limited experience and technology.

The second step is concluding die and mold maintenance contracts with Korean makers exporting molds to international companies in Mexico and starting companies responsible for maintenance of the delivered molds. In the maintenance process, a domestic company will transfer mold repair technology to a university and more international companies will recognize domestically made molds by SMEs. The partnership will earn profits for both companies if molds are supplied to international companies with no loss.

The third step is to establish a joint venture with a Korean partner and get direct orders from international companies based on a good maintenance relationship and mold design technology of Korean mold makers if the number of customers in Chihuahua is large. The joint venture will start an independent business with Korean technology, people trained at TUC and business relations with international companies.

276 • 2014/15 Knowledge Sharing Program with Mexico [Figure 5-23] Matchmaking between Domestic SMEs and KODMIC

Stamping CADISA Die

Korea Die & Injection International Mold Industry + CBQ Tech Molds Companies Cooperative

Injection 600 enterprises HASI Design & Molds Fabrication Maintenance

[Figure 5-24] Cooperation Model for Korean Mold Makers, Domestic SMEs and Technological University of Chihuahua

Korean Mold Makers Export

Technology Mold Design Customer Data Maintenance

Local SMEs Repair Supply

Experience International companies Training Facilities Human

Technological University Worker

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 277 C. Long-term Policy for Mexican Gov’t

1) Korea Mold Technology Center in Mexico

Mexico has a developed industrial area that is rented out to international OEM companies. Plastic and metal parts production and assembling technology have been transferred to workers at OEM companies. People with experience in the industry teach technology to students at school.

But the mold makers did not enter Mexico because of poor infrastructure that raised the cost of developing molds. Since one mold is enough to produce a million plastic parts, mold makers have no need to move factories to Mexico. To learn international mold technology, the government should give profits to foreign mold makers that enter Mexico in return for their training people in mold technology. If an international mold company is in Mexico, the technology will be transferred to the staff. The technology transfer will be accelerated if international mold makers are located at the training center or university.

The Korea Die and Mold Industry Cooperative wants to establish a Korea Mold Technology Center in the middle of Mexico, where the infrastructure for repairing automotive mold is poor. Korea will invest US$4 million in equipment and US$2 million in operating costs. The 20 major mold makers will operate Korea Mold Technology Center in Mexico to export and repair automotive molds.

The cooperative is looking for a university, training center or research lab that will rent the land and building free for 15 years. If the center is located at the research lab, the researchers will experience molds and become experts in the field. If the center is located in a university or training center, practical training in automotive molds will be possible for students. The Korea Mold Technology Center will teach automotive mold repair technology to Mexicans, who need about five years of training to become mold engineers.

The Mexican government should rent out required buildings free to the Korean cooperative to establish the Korea Mold Technology Center in Mexico. The MOU between Mexico and the cooperative will push the Korean government to help in the project. Mexico will rent the building (80 x 20 x 8m) for 15 years free and Korea will establish the Korea Mold Technology Center with US$4 million in equipment and US$2 million in operating cost for the first three years. Mexico will gain Korean mold technology and Korea will export molds to OEM automotive companies and maintain molds in central Mexico.

Mexican mold companies repair molds themselves but have no relations with

278 • 2014/15 Knowledge Sharing Program with Mexico international mold makers. The Korea Mold Technology Center will become a partner of Mexican mold companies and offer training in automotive mold repair technology in the space with the center’s equipment every year. When domestic companies that learn mold technology at the center start mold development businesses, Korean mold makers will become technological partners to get orders from international OEM companies.

The schedule of the project started with the MOU of KODMIC (Korea Die and Mold Industry Cooperative) and Mexican partners in the beginning 2016. The MOU’s important role is to get KODMIC funds from the Korean government in March 2016. The Korea Mold Technology Center will be established in July 2016 and will be supported by the Korean government until 2018. The building will be supported by Mexican partners and 20 pieces of equipment will be moved from Korea: machinery center (three), injection molding machine (three), 300-ton press machine (one), electric discharge machine (two), wire EDM (two), super drill (one), milling (two), tool grinder (one), face grinder (one), radial drill (one), saw (one) and laser welding (one). The Korea Mold Technology Center will be self-operated in Mexico from 2019 without Korean government support.

[Figure 5-25] Korea Mold Technology Center in Mexico

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 279 [Figure 5-26] Partnership of local mold SMEs and Korea Mold Technology Center

2) Mexican government dispatches workers to Korean mold makers

Technology moves with people. China sent workers to Korean manufacturers 15 years ago to learn Korean manufacturing technology for three years, and they later started small manufacturing businesses with the technology learned through government-subsidized loans. China, which had imported molds from Korea and Japan, became the world’s top mold exporter in 2014, with Korea third.

The assembly and part production technologies of international companies were transferred to workers at the Chihuahua division. The die and mold technologies of foreign SMEs were unavailable because mold factories were not moved in Chihuahua. To learn technologies from foreign SMEs, Chihuahua state needs to send people abroad for training or employ retired engineers from overseas.

If the central government of Mexico signs an agreement on sending workers to Korean small manufacturer, Mexican workers can earn a livable salary in Korea and learn technology required for the metal mechanics industry. They will come back with world-class manufacturing technology and help advance technology in Mexico.

The exchange program for Mexican workers also helps thousands of Korean mold makers given the latter’s difficulty in finding staff because they are small companies, albeit with world-class technology. They started hiring Chinese ten years ago and now employ Vietnamese and Pakistanis. Mexico should gain global technology,

280 • 2014/15 Knowledge Sharing Program with Mexico and Korean SMEs have much to offer in advanced technology and employment of foreign visiting workers.

The Ministry of Employment and Labor (moel.go.kr) of Korea has an employment permit system (eps.go.kr) that allows Korean companies to legally employ foreign workers. Fifteen countries send 40,000 workers to Korean manufacturers every year. The Mexican and Korean governments have signed an MOU on sending workers. Government institutions administer the process of Mexican worker selection and introduction based on the MOU. Mexico selects quotas of workers based on objective qualifications such as TOPIK (Test of Proficiency in Korean) score, results of a skill test and work experience. The Korean company sends a CCVI (Certificate for Confirmation of Visa Issuance) to Mexico, Mexican workers apply for a work visa (E-9) at the Korean Embassy and then enter Korea after visa issuance.

Mexico is a mold importer but will be a mold exporter ten years after university and domestic SMEs share facilities and trains in mold, and Mexicans work and learn advance mold-making technology in Korea.

The suggested policies do not require funding and form the minimum role of the Chihuahua government, but please remember that the Chinese, Japanese and Korean governments will help their own mold makers to compete with Chihuahua SMEs.

[Figure 5-27] Mexico Sends Workers to Korean Mold Makers

1. MOU Ministry of Mexican Gov't Employment & Labor

2. Apply TOPIK 2. Apply 3. Permission

Korean Mexican 4. CCVI Korean Embassy Worker Mold SME 5. Visa 6. Enter

7. Mold technology

Chapter 5 _ Improve Metal Mechanics Cluster in Mexican State of Chihuahua (Dies & Molds) • 281 References

Employment Permit System, www.eps.go.kr. Korea Die & Mold Industry Cooperative, Thirty Years of KODMIC History, 2010. , www.kodmic.co.kr. Statistics Korea, 2010 Statistical Report on Mining and Manufacturing, 2011.

282 • 2014/15 Knowledge Sharing Program with Mexico