Dr. Arie van der Zwan Directorate General - Research European Commission Brussels

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Dr. Arie van der ZwanDirectorate General -
Research European CommissionBrussels
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Dr. Arie van der Zwan

• European Commission (2002-Present)
• Ministry of Netherlands Economic Affairs (16
  yrs)
• Directorate-General for Innovation
• DG for Economic Structure, Technology Policy
• DG for Industrial Policy
• DG for Energy Policy

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European Research PolicyKnowledge based society
and EconomyArie van der ZwanEuropean
Commission, DG Research Strategic and policy
aspects investment in researchInnovation and
Competitiveness Workshop Istanbul, 19 April
2004
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Content

• Europes technological (under) performance
• Lisbon goals to become the most competitive and
  dynamic knowledge based economy in the world
• Important issues in Lisbon Process
• the Barcelona 3 objective and action plan
• issues for new Member States
• the open method of co-ordination
  (OMC)-cross-country dialogues to formulate
  strategies for research policies

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Europes sombre technological performance

• Can be no denying Europes persistently poor
  technological performance
• and the negative impact that has on the overall
  economy
• Many indicators of this under-performance, e.g.
• relative weakness of our high-technology and
  knowledge-intensive sectors
• relative slowness to absorb new technologies
• inferior rates of labour productivity growth
• If Europe continues to under-perform this way, we
  will never achieve the Lisbon goals to become
  the most competitive and dynamic knowledge based
  economy in the world

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Why technological under-performance?

• Many contributory causes
• for example, Europes very different mix of
  industries
• with a much smaller high technology sector
• with many fewer large companies
• Defence oriented RD
• But, a major cause has to be the deep-rooted
  structural weaknesses affecting our research and
  innovation systems
• research inputs are too low
• both financial and human
• unfriendly environment for research and
  innovation
• excessive fragmentation of public research

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Structural weaknesses affecting Europes research
system

• Financial inputs
• Human inputs
• Unfriendly framework conditions

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Financial inputs

• Europe substantially under-invests in research
• less than 2 of GDP and stagnant
• compared with nearly 3 in US (also 3 in Japan
  and Korea)
• EU-US RD Gap growing from 71.6 bn in 1995 to
  117 bn in 2000decreasing to 111 bn in 2002
• increasing public funding gap from 17 bn (2000)
  to 26 bn (2002)
• decreasing business funding gap from 104 bn
  (2000) to 87 bn (2002)
• An input gap of that magnitude cannot be bridged
• by being more clever
• nor by importing technology from others
• because of our poor absorptive capacity
• First policy conclusion to be technologically
  competitive, Europe, particularly European
  business, must invest much more in research)

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Human inputs

• Research is particularly labour-intensive
• If our goal is to increase investment
  substantially, we have to find large additional
  numbers of researchers
• Europes career pipeline is however increasingly
  leaky and made worse by unfavourable demographics
• so the future supply of European-trained
  researchers may be insufficient even to maintain
  the status quo
• and could therefore impede attempts to increase
  investment in research
• Second policy conclusion as we cannot invest
  more without employing more, we must plug holes
  in the pipeline and make Europe much more
  attractive to (third country) researchers

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Unfriendly framework conditions

• Regulatory shortcomings
• incomplete internal market, ill-adapted IPR
  regimes, excessive costs of new company
  registration, outdated bankruptcy and insolvency
  laws, unfriendly standards, barriers to mobility
  of researchers
• Financial weaknesses
• underdeveloped venture capital markets,
  particularly for early-stage finance, relatively
  weak fiscal incentives
• Networking failures
• weak science-industry linkages, weak
  cross-linkages between innovation actors
• Unfriendly social environment
• poor acceptance of new technologies, attitude of
  the young, weak culture of entrepreneurship

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Unfriendly framework conditions (contd)

• Conditions vary from country to country, but,
  from an overall European perspective, these
  unfriendly framework conditions
• seriously inhibit business investment in research
• reduce absorptive capacity for new technologies,
  wherever generated
• lead to ineffective exploitation of our public
  research base
• (Third policy conclusion it is urgent to improve
  the framework conditions, but this will require a
  wide portfolio of policy measures, many outside
  research policy)

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Fragmentation in public research

• Majority of public research in Europe (gt80) is
  executed in a purely national frame
• with rather low levels of co-operation between
  different countries at either the programming or
  policy levels
• This combination (of fragmentation and
  compartmentalisation) often results in
• much uncoordinated parallel work
• wasteful duplication
• insufficient competition always to ensure
  excellence
• teams that lack critical mass
• (Fourth policy conclusion countries must
  co-operate more in their research policies and
  programmes, if we are to make effective use of
  limited public resources available for research)

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• The Barcelona 3 objective and Action Plan

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3 Action Plan A Systemic Approach

• Industry will invest more in RD in Europe only
  if it can expect improved returns on investment
• A drastic reappraisal of current policies and a
  major structural change towards more RD
  intensive sectors enhanced innovation in
  existing sectors
• All factors affecting performance of RI systems
  need to be addressed e.g. from research to the
  market place
• A broad range of policies need to be mobilised in
  a coherent way e.g. RDI, internal market,
  competition, Regional, etc.

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RD intensity by source of fundingD intensity by
source of funding
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3 ObjectiveWhat is at stake?
Long term gains by 2010 and by 2030

• EU-US RD Gap growing from 71.6 bn in 1995 to
  117 bn in 2000
• decreasing to 111 bn in 2002
• increasing public funding gap from 17 bn (2000)
  to 26 bn (2002)
• decreasing business funding gap from 104 bn
  (2000) to 87 bn (2002)
• Estimated gainsif EU reaches 3 in 2010
• Until 2010
• 0.25 GDP (annual average)
• 2 million jobs over 2004-2010
• After 2010
• 0.5 GDP every year
• 400,000 net jobs every year

Gains from reaching 3 RD by 2010 compared to
statu quo
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Lisbon progress

• (Spring Report 2004)
• Undeniable progress after 4 years but
  insufficient implementation at MS level
• Improving investments in knowledge and networks
  as key priority for 2004 (Growth Initiative)
• Spring Council has seized opportunity of economic
  recovery and the coming enlargement to increase
  impetus

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The impetus of Enlargement

• (Spring Report 2004)
• Increased trade investment opportunities
• Good growth potential (av. 4 p/a)
• Experience of reform and commitment to the
  process in the new MS will increase EU momentum
• Accession comes at a critical timely moment
  Mid-Term Lisbon Review First report on progress
  of 3 Action Plan

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Issues and Actions for new MSs(Informal
Seminar, Brussels, March 03)

• Promote RD in domestic firms raising their
  awareness of opportunities, improving their
  access to capital and raising their profile for
  investors.
• Orientate FDI towards knowledge and RD
  accentuating spill over effects, innovation and
  capability transfer, linkages with local
  knowledge infrastructure, etc.
• Counter the brain drain improving the
  attractiveness of the research career accompanied
  by actions to address the demand for RD and
  technology.

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Issues and Actions for new MSs(Informal
Seminar, Brussels, March 03)

• Upgrade research infrastructure and rebalance the
  distribution of large ST facilities to the
  benefit of new MSs, to offer domestic
  opportunities for RD teams.
• Establish systemic innovation policies which aim
  at balanced progress on RD capability, demand,
  diffusion and absorption factors, and stronger
  co-ordination between RD, education, economic,
  and other relevant policies.

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New MSs and the Barcelona Targets

• (3 Action Plan/ OMC Snapshot)
• Politically committed to Barcelona objective (RD
  intensity targets), but budgetary commitments
  difficult
• Public investment decline reversed many showing
  substantial growth
• New fiscal measures (HU, LV)
• Participating in OMC 3
• Efforts must be sustained

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• The Open Method of Coordination
• (OMC)

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What do we mean by OMC?

• OMC was introduced at the Lisbon Summit as a
  soft form of European governance
• to fill the gap between simple cooperation at
  MS-level and full legislative integration at
  Union-level
• for use particularly in fields where the prime
  responsibility for policy-making lies with MS
• OMC offers an adaptable voluntary coordination
  framework that assists MS progressively to
  develop their own national policies
• to tackle common challenges
• with the aim of achieving collectively agreed
  Union-wide goals

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How does OMC function?

• OMC functions through an iterative cycle,
  involving
• at Union-level the collective setting of
  Union-wide objectives and a timetable
• at individual MS-level the translation of these
  common objectives into national action plans and
  targets
• MS collectively regular multilateral monitoring
  and collective self-assessment
• allowing the cycle to be closed and repeated with
  progressively increasing intensity
• To be effective, the whole process needs support
  with operational tools
• such as foresight, scoreboarding, benchmarking
• particularly to promote mutual learning and
  self-improvement

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OMC-topics

• Public research base and its links with industry
• SMEs and research
• Fiscal measures for research
• IPR and research
• Public research spending and policy mixes
• Human resources and mobility

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Conclusions

• Absolute need for EU to invest more in RD
• Strategy and goals set by 3 action plan
• Cross-country dialogue by OMC