1. Human Capital and the National
Innovation Strategy for
Competitiveness
The case of Chile
Hernán Araneda
Head, Centre for Innovation in Human Capital
Fundación Chile
Santiago, April 26th, 2010

2. About Fundación Chile
Who we are:
Fundación Chile is a non-profit, privately owned
corporation, created in 1976 by an agreement between
the Chilean Government and ITT Corporation (U.S.A.).In
2005 BHP Billiton became a co founder.
Our Mission:
To increase the competitivity of human resources and
productive sectors and services, by promoting and
developing high impact innovations, technology transfer
and management for the country.

3. “There are three proven models worldwide that are
examples for emerging economies: The
industrialization model of China, The outsourcing
model of India and the model of Fundación Chile”
(OECD)
“…by 1982, Fundación Chile had its first salmon farm
up and running. Seven years later it sold it to a
Japanese company for $22 million” (Businessweek)
“In 2004, its first year, the laboratory turned out 1.7m
partially fattened lilly bulbs, using up-to-date
biotechnology. Vitro Centre is a joint venture between
local investors, Fundación Chile and a Dutch firm… (The
Economist)

4. Strong Brand Name Recognition

5. Chile’s background
16 million people, native language spanish
Upper Middle income country, per capita GDP US$ 12.000
(purchasing power parity)
Average GDP Growth 1990-2005: 5,5 %
Global Competitive Index 2007: 26
Significant progress in poverty reduction: 44% to 18%
(1986-2006).
Unemployment rate: 7.3 (best in 8 years)
High coverage in primary and secondary education
Participation in Tertiary Education has tripled in the last
15 years.

6. Chile is performing fine in several
rankings…
GDP : Annual Growth POVERTY 1987 2006
Rates Selected % of population 44% 18%
Countries: average Source: ECLAC
1990-2005
China 9.0
Singapore 6.1
South Korea 5.9
Chile 5.5
Indonesia 4.5 Corruption Perception
Mexico 3.1 Index Ranking
Poland 2.6
OECD 2.5
Among Latin 1st
Argentina 2.4
Brazil 2.0 American
Hungary 1.3 Countries
Overall 20th
Czech Republic 0.6
Ranking Among
146 Countries
Source: Transparency International
(www.transparency.org), 2005

7. But…
Percapita income still lacks behind the OECD (40% of
OECD average income level)
Unequal income distribution (0.55 Gini; 0.75 excluding
the highest income decile)
Economy too dependent on commodities: more R&D
investment required
Relatively low labour productivity
Low quality of learning outcomes across the education
system (Simce, TIMMS, PISA, IALS)
Uneven distribution of opportunities in higher education
and training
Low participation of women in the labour force

8. The country’s most important goal:
doubling percapita income in the next 15
years to become a developed country
IMF: per capita GDP
(US dollars, Sept. 2006)
USA (43,236)
Canada (35,779)
Hong Kong
(35,396)
Singapore
(29,743)
Taiwan (29,244)
Spain (27,542)
Finland (32,822)
N. Zealand
Australia (32,127)
(25,655)
UK (31,585)
Sweden (31,264)
France (30,150)
Estonia (17,802)
CHILE Lithuania (15,443)
Argentina
Slovenia
(23,159)
(14,838) Korea (21,887)
Latvia (13,875)
… and this is a major
Malaysia (11,915)
challenge. Only once in our
history have we managed to
double our per capita GDP in
16 years: 1988-2004.

9. Business as usual is not sufficient; We must decisively
move towards a Knowledge Based Economy
Growth depends less on capital and labour
accumulation than on efficient use of these factors
(Total Factor Productivity).
We need to move from static comparative advantages
linked to natural resources to a stage where the
incorporation of more knowledge into products and
services is crucial.
In brief - the capacity to transform knowledge into
wealth, the capacity to INNOVATE.

10. Are we prepared?
Over the last decade TFP contribution has fallen
dramatically…and forecasts are frightening.
TFP would account for less than 25% of Chile’s growth
in the 2007-2011 which compares poorly with the figure
for competing economies (40% to 50% according to The
Economist Intelligence Unit) TFP contribution to growth 2007-2011
Growth TFP Capital Labour
1984- 7.1 2.8 2.1 2.2
1997
1998- 3.6 0.9 2.4 0.4
2005
Selected
CHILE
countries*
* Bálticos, Europa del Este y países de rápido crecimiento de Asia.

11. Three decisions to move forward
Innovation
1. Increasing public funding to support the strategy
(new mining tax).
2. R & D tax incentive for companies.
3. Creation of a National Innovation Council for
Competitiveness – National Innovation Strategy
To propose a roadmap for a development process based on
competitiveness supported by human capital and knowledge.
To look after policy coherence
Defining strategic objectives
Defining the roles of agents
Resource allocation aligned with the strategic priorities

12. INNOVATION STRATEGY
HUMAN BUSINESS R&D
CAPITAL INNOVATION strategycally
(value creation) oriented
EFFICIENT INSTITUTIONALITY COMPETITIVENESS
(long term vision, “accountability”, regionally focused)
SELECTIVITY
Focus on economic clusters

13. Selectivity: focus on clusters
Serv.medio Outsourcing
0.17 ambiente
0.16
Crecimiento PIB en 10 a ños Industrias
0.15 creativas
0.14 1 billón de pesos
Alto Alimentos Acuicultura
0.13 Sectores que se
procesados de
consumo humano Servicios
0.12 destacan financieros
0.11 Vitivinicultura Fruticultura
crecimiento (%)
Plástico primaria
Potencial de
0.10 Comunicaciones
Horticultura Plataforma de negocios para LA
0.09
primaria Porcicultura y avicultura
Educaci ón superior
0.08 Medicina Minería no met álica
Medio Farmac éutica especializada Logística y
Construcci ón
0.07 Consultor ía
transporte
Bovino Alimentos proc. para
0.06 y ovino Comercio minorista
consumo animal
0.05 Industria Lácteo Miner ía del
química cobre y
0.04 Productos Turismo 1 subproductos
de madera Silvicultura
0.03 Celulosa
Bajo y papel
0.02 Metalurgia
0.01
0.00
Alto Medio Bajo
1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5
Esfuerzo para lograr la
competitividad necesaria
(1) Dentro del sector de Turismo fue considerado el subsector de Turismo de Intereses Especiales, que tiene un dinamismo much o mayor que el sector de Turismo
tradicional

14. Consolidate a business system aimed at the
creation of value by means of innovation – in all its
BUSINESS forms and aspects – as a competitiveness strategy
INNOVATION
in global markets.
Strengthen a platform for the creation,
dissemination and application of knowledge
in a permanent and consistent research
Science with
strategic effort coherent with the country’s
orientation productive and social problems.
To establish an accessible and top-quality
life-long-learning system which allows the
Human country to rely on the relevant human
Capital capital the Knowledge Economy requires

15. Nz
0
2
4
6
8
10
12
14
ea
la
nd
Ko
re
Ch a
ec Fin
Re lan
p d
Ch
ec
Ho a
lla
nd
Ire
la
n
Hu d
ng
ar
G y
re
Human Capital Stock
ec
Ar e
ge
nt
in
a
Ch
M ile
al
7,89
ay
sia
Sp
ai
M n
ex
Average years of schooling (ages 25-65)
Co ic o
lo
m
b
P o ia
rtu
ga
l
Br
az
il

16. Tertiary education graduates in the
workforce
Prof. and techn. as a % of the
current workforce
50
40
30
20
10
0
d
Co re a
ec d
Hu in
il
Ko y
ile
I re d
M ia
Nz Re p
Ho d
M ic o
ia
az
Ch lla n
lan
ar
n
n
a
b
ys
Ch
nla
la
Sp
lom
ng
ex
Br
ea
ala
Fi

17. Educational attainment
of the adult population: the stock problem
Distribution of the Population aged 25 to 64 years by highest level of education completed, 2003
100
90
80
70
60
50
%
40
30
20
10
0
Thailand Paraguay Peru 2002 Brazil 2002 Indonesia Jordan Chile 2003 Argentina Uruguay Malaysia Russian OECD WEI mean
2003/04 2002 2002/03 2002/03 2002 2002 2002 Federation mean 2003 2003
2002/03
Primary Lower secondary Upper secondary Tertiary (type B) education Tertiary (tipe A) education
Source: Education Trends in Perspective – Analysis of the World Education Indicators. UNESCO-UIS/OECD 2005

18. Basic competence (prose):
50% of the population in performance level 1
Adult Functional Literacy Survey (1998)
100%
90%
80%
70%
60% PERFORMANCE LEVEL
50%
40%
Level 4/5
30%
Level 3
20%
Lever 2
10%
0%
Level 1
y
es
ile
en
a ry
lic
l
m
ga
an
do
ub
Ch
tat
ed
rt u
ng
rm
ing
ep
dS
Sw
Po
Hu
Ge
cR
dK
ite
e
Un
ite
Cz
Un

19. % of Enrollment in Higher
Education
90
80
70
60
50 1991
40 2004
30
20
10
0
Chile S.Korea Estonia Ireland Latvia Lithuania

20. Primary & Secondary Education: high
coverage, low quality of learning outcomes
(TIMSS, PISA, SIMCE).
PRIMARY EDUCATION COVERAGE BY INCOME QUINTILE, 1990 - 2003
95,6 98,5 96,9 99,1 97,7 99,5 97,5 99,5 98,9 99,5
100
90
80
70
Percentages
60
50
40
30
20
10
0
I II III IV V
Income Quintiles
1990 2003 SECONDARY EDUCATION COVERAGE BY INCOME QUINTILE, 1990 - 2003
96,9 98,8
100 92,0 94,2 94,5
87,7 87,1
90
80,8
80 77,2
73,9
70
Percentages
60
50
40
30
20
10
0
I II III IV V
Income Quintiles
1990 2003

21. Tertiary education enrollment by
income quintiles
80,0
70,0
60,0
50,0
40,0
30,0
20,0
10,0
-
1990 1992 1994 1996 1998 2000 2003 2006
I 4,4 7,9 9,1 8,8 8,7 9,6 14,7 19,8
II 7,7 9,8 10,2 15,4 13,3 17,7 21,4 25,1
III 12,4 13,0 17,4 21,5 23,2 31,7 33,1 33,3
IV 22,0 23,9 32,1 35,2 38,9 43,0 46,9 47,2
V 40,7 41,2 54,8 60,0 65,4 67,4 73,6 67,1

22. Participation in training
ADULT PARTICIPATION IN TRAINING
(15 to 60 years people)
16
13,9 13,6
14
12
Percentage
10 9,1
8
6
4
2
0
CASEN Survey 1998 CASEN Survey 2000 CASEN Survey 2003

23. Most participants in training come from big
companies…
PARTICIPATION RATE IN TRAINING PROGRAMS BY ENTREPRISE SIZE
45,0
40,0 38,6
35,0
30,0
26,0
25,0
Rate
20,0 18,3
15,0
10,0
6,0
5,0
0,0
1 to 9 10 to 49 50 to 199 200 or more
Number of workers
Source: SENCE and CASEN Survey 2003

24. LLL drivers and issues (1)
High coverage in initial education but low quality of
learning outcomes (TIMMS, PISA, etc.)
A significant % of adult population without initial
education lacking basic skills
Students lacking academic and employability skills for a
friendly school-to-work transition
Increasing demand for post-secondary learning
opportunities: education seen as the vehicle for social
mobility (high private returns, etc.)
Expansion of the market of post-secondary ed. and
training providers (esp. private universities) but no public
information about graduates labor market outcomes
Concern about quality and relevance of programs,
accreditation frameworks still to be piloted

25. LLL drivers and issues (2)
Disjointed “systems” providing LLL and training
opportunities,
Public effort on training limited to a tax incentive for
companies; no funding arrangements for individual
workers.
Vocational education not well funded by government: poor
quality and relevance for industry
A significant amount of (competent) workers without
formal recognition for their skills
Lack of a shared vision and agenda among ministeries
relevant for LLL: education, labour, economic
development.

26. LLL drivers and issues (3)
Adult education, technical-vocational education,
workforce training and career guidance systems
seen as missing pieces in the 90’s reforms
Learning outcomes and not only “inputs” and
“processes” as the best approach once universal
coverage is achieved
Lack of a coherent public policy on vocational
education (both secondary and postsecondary)

27. Strategy
Main purpose: design and piloting new arrangements,
capacities and funding mechanisms supporting LLL
Multisectorial: Min of Education; Min Labour & Social
Affairs; Min of Economic Development; Industry
Associations; companies
Combination of remedial actions; learning innovations;
institutional innovations; ”demostrative projects”
Diverse clientele:
adults with low educational attainment (unemployed
/ bad jobs);
young people attending VE;
Workforce

28. A systemic view from
the National Competency System
Labour Market
Intermediation /
Information
Services
Industry Competency
HR Management Endorsed Assessment &
(recruitment, selection, National
Competency Certification
performance appraisal, Training System
training, sucession plans, Standards System
rewards, etc.)
NATIONAL LABOUR COMPETENCY SYSTEM
Technical
Vocational Education
(secondary,
postsecondary)

29. Where we stand
15 industry specific associations, 150
leading companies
500 occup
MOBILIZE
2.STAKEHOLDERS
Movilizar Actores DEFINE
standards, +
15 economic Claves OCCUPATIONAL employability skills
sectors 3.Definir Estándares
SELECT AND
1.Seleccionar e
AND EMPLOYABILITY models (8
SKILLS
IDENTIFY
Identificar Sector STANDARDS competencies) +
INDUSTRY
Productivo entrepreneurship
skills
UPDATE
8. Actualizar Estándares VALIDATE
STANDARDS
según Necesidades STANDARDS
AS NEEDED
4.WITH
Validar
PROMOTE STAKEHOLDERS
Estándares
-Web site competency
AND con Actores
standards 7.Promover y
DISSEMINATE KEEPING Claves
-New regulation Difundir MANTENIENDO LA
THE
VENTAJA
COMPETITIVE
-Media coverage COMPETITIVA
EDGE
ADAPT CURRICULA
EVALUATE AND 5.Adaptar Currículum y
AND TRAINING TO
6.Evaluar y Certificar Formación según
CERTIFY WORKERS / STANDARDS Methodology
Trabajadores
STUDENTS Estándares transfer to
40.000 workers certified 300 VET
Employability skills for providers
7.000 students

30. A case of best practice in Competency
Development: the chilean Mining Sector
ESTUDIO DE
CREACIÓN ÁREA IMPACTO ECONÓMICO
COMPETENCIAS CERTIFICACIÓN DE
LABORALES COMPETENCIAS EN
FUNDACIÓN CHILE MINERÍA
PROMULGACIÓN LEY
DE CERTIFICACIÓN DE
Gerencia de Depto. Administración
COMPETENCIAS
Capital Humano Universidad de Chile
1998 1999 2000 2001 2002 2003 2008 2009
GIRA
Acuerdo EXPERIENCIAS DEMOSTRATIVAS
TECNOLÓGICA
EN EMPRESAS PRIVADAS Y PÚBLICAS
Fundación Chile
España - Inglaterra
Consejo Minero Codelco Chile
– Francia
Bid-Fomin Enami
INTEGRACIÓN Consejo Minero Collahuasi LANZAMIENTO CATÁLOGO
EMPRESAS Fundación Chile Barrick – Zaldivar COMPETENCIAS
(Estandarización) Collahuasi Anglo American SECTOR MINERO 2009
Escondida
Codelco Codelco
Collahuasi Antofagasta Minerals
Escondida
Barrick
INTEGRACIÓN
PILOTO
GUBERNAMENTAL
EVALUACIÓN
Chilecalifica
1371 Trab.
Sence
Codelco
Collahuasi
Escondida

31. Where do we stand against the LLL
agenda?
Several pilots and demostrative projects articulating
supply and demand at a regional level. Impact
evaluation going on (WB).
Some of the regulations needed in place or in final
stage of approval (ie National Competency System)
Competency “movement” underpinning curriculum
development in most higher institutions across the
country. “Modules” and “Competency Based VET
Programs” being developed.
National Agenda for Innovation and Competitiveness,
a new driving force for LLL in the country, as far as it
supports human capital in strategic economic clusters

32. Current issues
Competing policy agendas still a problem: M.Education
too busy with the unfinished school reform and
M.Labour with the pension reform and persistent youth
unemployment
A new policy for secondary and postsecondary TVET
Qualifications framework informing pedagogical
innovation and new learning materials
Quality framework for QA and accreditation
Diversifing funding mechanisms for learners beyond
initial education
Innovation in education & training.