Creating a strong base: Medellín has a plan to boost science and technology

Innovation has taken centre stage in the growth plans of Medell n, Colombia’s second-largest city. In an attempt to diversify its traditionally strong industrial base, the city has embraced science, technology and innovation (STI) as a primary driver of development in strategic growth areas, such as energy, construction, health care, and information and communications technologies (ICT). Indeed, the city has ambitions to become the region’s capital of innovation by 2021.

BOOSTING INNOVATION: As outlined in its STI 2011-21 plan, over the coming years the city’s investment budget will allocate up to 5% of its GDP to stimulate innovation, as part of its efforts to attain the highest per capita income and achieve 80% enrolment in science-based graduate programmes. The plan has identified energy, health and ICT as core growth areas, and set up respective clusters to define educational needs, nurture local businesses and attract investors. Funding for the plan is mainly derived from a 7% allocation of the revenues of the Empresas Públicas de Medellín (EPM), the local public utilities company, and will amount to an estimated COP417bn ($250m) between 2013 and 2021. The plan’s implementations hinges on close collaboration among representatives from the public and business and academic communities, which, according to many residents, is at the core of the city’s rapid development in recent years. “Among the initiatives to turn Medellín into a capital of innovation and entrepreneurship, we have the project University-Industry-State that facilitates networking and promotes dialogue among the parties involved in the development of innovation projects,” Juan Betancur, the president of Proantioquia, a regional development foundation, told OBG. The 10-year STI strategy, the implementation of which started only two years ago, has already shown some results. Large multinational companies such as Hewlett Packard (HP), Holcim and Kimberly Clark have set up regional service and research bases in the city in the past two years, partly attracted by the burgeoning innovative business environment and the innovation technology vocation of the growing employee base. A key role in the strategy’s implementation has been reserved for Ruta N, which functions as an incubator of knowledge-based businesses and accommodates foreign entrants. The entity, established by the city’s administration and UNE EPM, a local mobile communications provider, opened a facility in the city centre in November 2011. Since then, HP has established itself on eight floors of one of the entity’s three buildings, where it plans to accommodate up to 400 workers by the end of 2014 in areas including software development, client services, support and sales. In addition, Holcim, a leading global company in cement production, established a regional office on the premises, followed by a dozen mid-sized local and foreign firms.

OTHER NEWCOMERS: According to Juan Pablo Ortega, Ruta N’s executive director, “The arrival of leading technology companies, such as HP, helps to increase the city’s productivity, as it supports the development of an entire ecosystem that cutting-edge technology requires.” Ruta N has also played a key role in bringing in US-based consumer goods producer Kimberly Clark, which set up a research and development facility with a global reach in the Manantiales Technology Park (MTP) on the outskirts of the city. MTP, overseen by the Antioquia Development Institute, a government agency, is currently under construction near the José Maria Córdoba Airport and slated for completion in 2017. When finalised, it will consist of 60 buildings with a capacity to host up to 200 companies. Besides Kimberly Clark, EPM has committed to establishing a research centre in the park that will be dedicated to exploring the use of nanotechnology in energy generation.

FERTILE ENVIRONMENT: Current development efforts go further than providing office space. Ruta N is also involved in an array of business-nurturing activities such as mentorship programmes, research projects, and human resources training and development. According to Ortega, Ruta N launched six innovation projects with the participation of 80 entities from the business and academic communities in 2012. It also allocated COP5bn ($3m) of seed funding and concluded national and international partnerships at a value of COP6.88bn ($4.13m). These efforts have put Medellín at the forefront of the innovation drive and raised the potential to receive further foreign and domestic investments. “Medellín is prepared to compete with other regional technology centres, and there is an unusual connectivity among academic institutions, private companies and the public sector,” Ortega told OBG.

GAINING A NAME: Medellín’s efforts in innovation extend far beyond economic policy. In March 2013 the city was awarded the title of “Most Innovative City of the Year 2012” in a global competition organised by the Wall Street Journal, Citi and the Urban Land Institute – largely thanks to its achievements in applying innovation to public services and consequently increasing social inclusion. Over the past decade innovative solutions have been applied to longstanding issues in urban transportation and environmental sustainability, which have had significant impacts on the lives of many of its most deprived residents. Since 2003 the city has built an underground metro, cable cars and escalators to connect its centre with its dense suburbs, many of which are located on steep surrounding mountainsides, thereby cutting commute time from more than two hours to a few minutes. This has facilitated the social inclusion of many lower-income households.

CHANGING FACE: It has also worked on opening new schools, museums, libraries and cultural centres in areas with traditionally high crime rates, with visible results on living conditions. Nationwide the city is lauded for its political consistency as the development focus has remained unchanged under four different mayors in the past decade. While policymakers are mindful not to overstretch the award’s impact on the international recognition of the city’s development, it has significantly contributed to its efforts to shake off past associations with violence and drugs. “It’s an opportunity for the city not only to have a title per se, but also to motivate it to keep on growing,” Rubén Darío Cadavid, Medellín’s cluster director of technology, information, and communications, told OBG.

While progress has been made, the road to an innovation-based business environment is not without its challenges. Among the most important is the need for the expansion of an internationally certified and bilingual workforce – a prerequisite to foster growth in business services like business process outsourcing (BPO). Similar to countrywide efforts, Medellín has identified BPO as a strategic growth area, particularly its more sophisticated sub-segments like IT outsourcing and knowledge process outsourcing. Colombia in general, and Medellín in particular, hold some of the region’s most competitive assets for becoming a preferred BPO destination in Latin America. With 6.9 subscriptions per every 100 inhabitants, fixed broadband internet subscriptions rank above neighbouring countries like Peru (4 per 100) and Ecuador (4.2 per 100).

BPO SHOWS RESULTS: As part of the strategic growth areas of the development plan’s ICT pillar, BPO has already shown some success, as evidenced by the arrival of HP and local companies like Enlace Operativo – part of the Colombian financial holding Grupo de Inversiones Suramericana, Emtelco and Allus. Other leading BPO companies, such as India’s Tata, have chosen Medellín as their regional headquarters. With a burgeoning critical mass of BPO providers, a focused approach towards the development of the industry and liberalised access to the US market, policymakers are keen to drive bilingualism forward. “The outsourcing sector is ready to offer more and better services internationally, but if Colombian companies want to be successful in the US market, we need to push the issue of bilingualism,” Enlace Operativo’s general manager, Carlos Augusto Castro, told OBG. In association with Medellín’s city government, the Ministry of Commerce, Industry and Tourism’s Productive Transformation Programme will train 1000 future BPO employees and bring them from an English language level of A2 to B2 in seven months with an investment of $600,000.

Foreign investors have an important role to play in this field. In collaboration with various Medellín-based universities, HP has developed training programmes that will focus on certifying teachers and students in a variety of ICT disciplines. The HP Institute, which oversees the initiatives, is set to start in the second semester of 2013. A partnership has also been formed between Grupo de Inversiones Suramericana and the ColombianAmerican Centre, a cultural and language-teaching centre based in Medellín, with the group providing scholarships for 377 university students in the municipality to study English at the centre.

The critical mass of innovation infrastructure developed recently has already drawn talent. Provided the sound relationship between the local government, the private sector and the academic community continues to produce political consistency and foresight, the future of Medellin as a hub for innovation and international knowledge-based companies appears bright.