Innovation-based sustainable growth is at the heart of the EU’s response to the present crisis

Interview with CséfalvayZoltán, Minister of State for National Economy, Hungary

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How has research and development improved the European economy in the past few years? 
In the past few years the economic context has changed substantially. A recession triggered by the 2008 financial crisis led to the adoption of stimulus packages to kick-start the economy. While slowly recovering from the downturn, Europe is now facing a sovereign debt crisis and fears of a new recession. The key challenge is to stabilise the financial and economic system in the short term while also taking measures to create economic opportunities and sustainable growth for the future.
Fiscal consolidation and structural reform are necessary but not sufficient to secure Europe’s global competitiveness. In an open global economy, competitiveness relies on the capacity of businesses to create high value added goods and services. Research and innovation help deliver jobs, prosperity, quality of life and global public goods. They generate the scientific and technological breakthroughs needed to tackle the urgent challenges society faces. Investment in this area also leads to businesses opportunities by creating innovative products and services. Although the Union is a global leader in many technologies, it faces increasing competition from traditional competitors and emerging economies alike and must therefore improve its innovation performance.
A move towards innovation-based sustainable growth is therefore at the heart of the EU’s response to the present challenges. The Europe 2020, the EU growth strategy to 2020, is based on the conviction that we need R&D and innovation to create smart, sustainable and inclusive growth to get Europe out of the current economic crisis. This includes the headline objective of increasing spending on R&D to 3% of GDP by 2020. The Innovation Union flagship initiative provides a comprehensive set of actions for stepping up research and innovation performance. Within this policy context, the Commission's proposals for the post-2013 Union Budget  reflect its ambition to invest in Europe's future, ensuring that every euro provides maximum benefit to European citizens.
In November 2011 the European Commission presented Horizon 2020, an €80 billion  programme to boost research, innovation and competitiveness in Europe. The funding programme runs from 2014 to 2020. A clear ambition is that the new programme should be more market oriented, covering the full innovation cycle from idea to commercialisation. It is expected that funding provided by Horizon 2020 will be easier to access thanks to simpler programme architecture, a single set of rules and less red tape. Significant efforts have been made to open up the programme to more participants from across Europe by exploring synergies with funds under the EU's Cohesion policy. Horizon 2020 will identify potential centres of excellence in under performing regions and offer them policy advice and support, while EU Structural Funds can be used to upgrade infrastructure and equipment. 
Have there been any educational, or other, programmes aimed at getting young people into the research/technology sector?
Highly trained and qualified researchers are a necessary condition to advance science and to underpin innovation. Against the background of growing competition at the global level, the development of an open European labour market for researchers, free from all forms of discrimination and encouraging the diversification of skills, is crucial to support a beneficial circulation of researchers and their knowledge, both within Europe and internationally. 
Under the 7th Framework Programme (FP7) of the EU, the People Specific Programme – and especially the so-called Marie Curie actions – aimed to address researchers at all stages of their careers, in the public and private sectors, from initial research training specifically intended for young people to encourage them to enter into the profession of a scientist, to life-long learning and career development. The programme has an overall budget of more than €4.7 billion in the period of 2007-2013 and it is also dedicated to attract talented researchers to Europe from the entire world. In these actions, any researchers – regardless of their nationality  – can participate, and there are special schemes targeted at strengthening the scientific cooperation between the EU and third countries (such as the Republic of Korea) by facilitating the exchange of researchers (IRSES action  – International Research Staff Exchange Scheme) and  promoting the mobility of third-country researchers to European (IIF – International Incoming Fellowships) and the mobility of EU researchers to third-country research organisations or enterprises (IOF – International Outgoing Fellowships).  
So far, what collaborations have been going on between EU and Korean companies and/or individual European governments, such as Hungary, and how might they improve in the future? 
European and Korean companies, together with other research organizations, are actively co-operating in the 7th Framework Programme, EUREKA intergovernmental initiative and in the frame of bilateral agreements with certain European countries.  It is interesting to note that according to a KORANET survey the majority of co-operation (44%) takes place on a case-by-case basis without any formalised programme, which indicates that there is still room for improvement for implementing more and better suited international programmes and also for making the existing programmes better known. 
The EUREKA Korea Day in Brussels is an excellent opportunity for that. 31% of the R&D cooperation between European and Korean organizations takes place within the framework of an FP7 programme but EUREKA has also become a key platform for Korea in industrial R&D cooperation – especially after Korea joined EUREKA as an Associated Country in 2010. The positive effect of its accession is clearly reflected in the increasing number of common EUREKA projects (25 common projects so far), indicating strong mutual benefits for all partners involved.
How easy is it for EU and Korean firms to collaborate on R&D/innovation projects? Do barriers still exist? 
As mentioned above Korean and EU firms can co-operate relatively easily with the help of several bilateral R&D agreements, the 7th Framework Programme and some other programmes, like EUREKA. In order to support the participation of both European and Korean partners in these programmes European or national funding and other support services are available. EUREKA National Project Coordinators, FP7 National Contact Points, European Enterprise Network offices offer practical information and tailor-made services to interested companies and other research organizations in Europe and in Korea explaining the concrete terms and conditions for R&D co-operation.
Some barriers still exist on both the programme level and the project level. On the programme level, a major obstacle is that the existing funding programmes can be too rigid – e.g. in the 7th Framework Programme calls can greatly differ on an annual basis – so some years there can be no calls that are intended specifically for Korean participants. This is not an issue in case of more market-oriented, bottom-up relations, e.g. EUREKA, which operates on a much more flexible basis. 
In some cases legal agreements are missing between Korean and European governments. It must also be mentioned that although Korean legal entities can participate in indirect FP7 activities, normally they are not eligible to receive an EC financial contribution to cover their participation costs, meaning that Koreans have to cover these costs from other sources (own funding or national programmes). The administrative burden can be also too demanding and not encouraging for real R&D collaboration. On the project level the main problems encountered are due to geographical distance: costs are relatively high to visit the countries of project partners and organize joint project meetings. 
The problem is even more evident when taking into account the fact that European and Korean researchers have insufficient connections among themselves thus generating and maintaining a high-level project can become cumbersome due to lack of knowledge of the foreign market, research landscape and major policy issues. 
Interest in co-operation with Korean partners in Europe is growing and some problematic issues, e.g. IPR issues, have also been already solved in the context of the EUREKA Programme.
What can the EU and Korean learn from each other in terms of, for instance, technology transfer, etc.?
The promising areas of bilateral co-operation present themselves in the form of transfer of chemical and complete agricultural technologies as well as in the fields of electronics, information and communication technology (ICT), engineering and medical sciences, the utilization of new and renewable energies (NREs), nuclear safety, etc. 
To ensure a smooth co-operation in the above fields it is relevant that the European and Korean partners can come to agreement in certain sensitive topics, for example, IPR issues. European partners can learn from their Korean counterparts as to how to bring the product, service or technology to the market in a more effective way. Innovation and transfer of applied research results to a successfully commercialized product on the market is a key criterion for a successful international collaboration. From a European point-of-view the Korean market is fast and competitive.
Koreans can learn about good practices in networking and network-building abilities existing between European partners – different clusters or network of excellences. These networks were built with the help of calls in the Framework Programmes and other joint European initiatives (EIT, JTIs) and slowly show promising results in bringing together scientific and managerial competences from different European countries. 
How can governments best serve the interest of international companies who want to invest in R&D, say, through tax breaks or other incentives?
For small and open economies such as Hungary, foreign trade and cross-border investment flows are of key importance for economic growth and development. International linkages through trade and FDI are also important for a country’s innovation performance since they are channels of knowledge flows both in an immediate sense and more indirectly through the transfer of knowledge embodied in imported goods. FDI serves multiple purposes in the economic development process. It can potentially play a key role in the performance of the national innovation system. 
Inward FDI acts as a channel of knowledge flows and, in principle, provides opportunities for learning in domestic firms and for establishing innovative regional networks around or involving foreign-controlled companies.
 There is now a considerable amount of empirical evidence concerning the spillovers from FDI to the host economy. Outward FDI that links the economy with knowledge centres and innovation networks abroad can also play an important complementary role in gaining access to cutting-edge information and technology.
Besides direct support, a number of tax incentives related to R&D and innovation address a variety of objectives (raising business R&D expenditure generally, providing a bonus to co-operative research, and stimulating development/use of human resources (such as tax-free employment of PhD, MSc or MBA students). At the same time, cluster-based policies can be adopted. While these have the potential to better embed MNEs into the various regional innovation systems, the integration of indigenous SMEs into these clusters remains a challenge. 
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