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Chile needs to invest more in research and development (R&D) and foster innovation, particularly in the business sector, to further reduce poverty and income inequality, says a report.

The review of Chilean innovation policy by the Organization for Economic Cooperation and Development (OECD) was published last week (8 November). It was requested by the government in preparation for Chile's admission into the 30-strong governmental forum of mostly developed nations. 

The stable political climate and sound economic policies provide firm ground for an innovation leap, says the report. But Chile must first overcome major weaknesses in its innovation system and policies.

Chile's geographically-dispersed and export-oriented industries are mostly divorced from research institutions in universities and government agencies. The country also spends little of its gross domestic product on R&D — 0.67 per cent in 2004 compared to the OECD's 2004 average of 2.25 per cent.

The report highlights "strong imbalances and bottlenecks" in the national innovation system and shortages in specialised human resources.

It praises the newly established US$150 million-a-year innovation fund and the Innovation Council for Competitiveness, set up to propose guidelines for a long-term innovation strategy. But it recognises that the council is not yet an effective catalyst for Chile's innovation system.

A recently introduced tax incentive, for businesses that set up R&D deals with universities or research centres, may not be enough to boost "the modest role played by the business sector in the financing and performance of R&D." This, says the report, is the feature that distinguishes Chile's innovation system from more advanced economies.

Two thirds of the money that goes into innovation is provided by the Chilean government, compared to just one third in developed countries, Jean Jacques Duhart, Executive Director of Innova Chile, the innovation programme of the Ministry of the Economy, told the newspaper El Mercurio.

The government's aim is that industry should take the lion's share in five years' time.

The review has been well received among Chile's policy-makers. "It recognises our strengths and proposes useful measures that have already been tried out in developed countries," José Miguel Benavente, an economics professor at the Universidad de Chile and advisor to the Innovation Council for Competitiveness told SciDev.Net.