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Competitiveness through Research & Innovation (World Bank)

“Europe 2020” and the Role of the EU Structural

Funds

Sofia, 21 June 2010

Athanasios SofosDirectorate General “Regional Policy”

European Commission

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Content• EU Cohesion / Regional Policy: Purpose, objectives,

budget, funds, interventions

• Implementation of Structural and Cohesion Funds in Bulgaria today (challenges)

• « Europe 2020 »

• Future possibilities

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EU Cohesion / Regional Policy - Purpose

• The EU is one of the world’s most prosperous economic zones

BUT:

• Huge disparities exist among the 271 EU regions – weakens the EU’s dynamism

HENCE:

• The political goal of reducing the gaps in development

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<50

50 - 75

75 - 90

90 - 100

100 - 125

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EU Cohesion / Regional Policy -

Purpose

Differences in development in the EU-27

GDP per head as a % of the community average

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EU Cohesion / Regional Policy - Purpose EU-27 GDP per capita in PPS in 2006Source: Eurostat structural indicatorsEU 27= 100

0

50

100

150

200

250

300

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The EU Budget 2007-2013 1/3 of the budget (“1B”) aims at

“Cohesion/Regional Policy” (=Structural & Cohesion Funds): €347 billion over 7 years

6,6

32,1

47,4

0,9

6,5 5,6

35,7

9,9

40,4

6,4

1,5

6,1

0

5

10

15

20

25

30

35

40

45

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1A Compétitivité 1B Cohésion 2 Ressourcesnaturelles

3 Justice 4 Acteur mondial 5 Administration

2006

2013

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Research / Innovation

EnvironmentTransport

Information societySocial infrastructureEnergy

TourismCultureInstitutional capacity

Human capital

Employment

Adaptability of workers and firmsSocial inclusionCapacity buildingTechnical assistance

Cohesion/Regional Policy: Structural & Cohesion Funds by sector 2007-13

European Regional Development Fund (ERDF)and Cohesion Fund (CF) - €271 billion

European Social Fund (ESF)- €76 billion

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Structural Funds 2007-13 : R&D + Innovation in the EU regions,

SMEs innovation

projects with

Universities and

Technology Centres

(A181)

21%

Clusters and business

networks : development

of a regional innovation

strategy (A182)

29%

Research, Technological

Development and

Innovation infrastructure

(A183)

2%

Business Advisory

services : Technology

forecasting and

Technology Audits in

SMEs (A163)

19%

Incubator units and

creation of technology

based firms (A164)

15%

Other Research, Technological Development

and Innovation projects (A180)

9%

Innovation f inancial engineering : seed and venture capital (A165)

5%

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Total EU funding for research and innovation (annual average funding)

7th FP, CIP and Structural Funds: Complementarity

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Bulgaria: General challenges - selection•Lack of management culture and clear allocation of responsibility:

– Slow absorption of funding across the sectors– Low administrative capacity– Redundant reporting and control– Complicated or unclear rules and procedures– Slow or late payments to projects

•Project pipeline

•Regularity issues (corruptive environment, weak judiciary, conflict of interest concept not always understood, procurement high risk)

•New financial perspectives (EU budget review)

•Budget deficit

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Bulgaria: Business/Innovation/R&D challenges - selection• Lack of forward-thinking and a well targeted strategy.

• Weak co-operation and co-ordination between institutions. (eg. Too many universities/research institutes weaken cooperation ties).

• Very slow implementation of measures in programmes.

• No or limited regional/local approach to innovation.

• Difficulties to secure funding for innovation.

• Slow process for attribution of patents.

• Knowledge transfer – benchmarking: Learn from others and apply in your region/locally (German Länder example).

• More effort needed to promote co-operation between private sector and research institutions.

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Europe 2020: successor to the Lisbon Strategy

RESULTS:

EMPLOYMENT: 66% in 2008 (compared to 62% in 2000)

R&D (1.9% in 2008 from 1.82% in 2000)

KEY TARGETS

• 70 % of the population aged 20-64 should be employed

•3% of the EU's GDP should be invested in Research & Development

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The crisis has wiped out recent progress:

• GDP growth: - 4% in 2009, worst since the 1930s

• Industrial production: - 20% with the crisis, back to the 1990s

• Unemployment levels:

– 23 million people– 7 million more unemployed in 20 months – expected to reach 10.3% in 2010 (back to 1990s level) – youth unemployment over 21%

Europe 2020: emerging from the crisis

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• Europe’s structural weaknesses have been exposed: lower growth potential, productivity gap, high and rising unemployment, ageing poverty, limited fiscal room

• Global challenges intensify: competition from developed and emerging economies, global finance, climate change and pressure on resources

Europe 2020: challenges ahead

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« Communication » from the European Commission: «Europe 2020 : A strategy for smart,

sustainable and inclusive growth”COM(2010) 2020, of 3 March 2010

• 3 thematic priorities• 5 EU headline targets – translated into national ones• 7 flagship initiatives – from the Commission+ 10 integrated guidelines for implementing reforms in

Member States

Europe 2020: the EU new strategy for jobs and growth

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1.) Smart growth: developing an economy based on knowledge and innovation

2.) Sustainable growth: promoting a more efficient, greener and more competitive economy

3.) Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion

Europe 2020: 3 thematic interlinked priorities

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• 75 % employment rate (% of population aged 20-64 years)

• 3% investment in R&D (% of EU’s GDP)

• “20/20/20” climate/energy targets met (incl. 30% emissions reduction if conditions are right)

• < 10% early school leavers & min. 40% hold tertiary degree

• 20 million less people should be at risk of poverty

• BUT NO “ONE SIZE FITS ALL”

Europe 2020: 5 EU headline targets (into national targets and trajectories by 2020

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Smart GrowthSmart Growth Sustainable GrowthSustainable Growth Inclusive GrowthInclusive Growth

Innovation« Innovation Union »

Climate, energy and mobility

« Resource efficient Europe »

Employment and skills« An agenda for new skills and jobs »

Education« Youth on the move »

Competitiveness« An industrial policy for the globalisation 

era »

Fighting poverty« European platform against poverty »

Digital society« A digital agenda for 

Europe »

Europe 2020: 7 flagship initiatives underpin the targets

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ECONOMICECONOMICSmart and sustainable GrowthSmart and sustainable Growth

EMPLOYMENTEMPLOYMENTInclusive growthInclusive growth

Guideline 1: Ensuring the quality and the sustainability of public finances

Guideline 7: Increasing labour market participation and reducing structural unemployment

Guideline 2: Addressing macroeconomic imbalances

Guideline 8: Developing a skilled workforce responding to labour market needs, promotingjob quality and lifelong learning

Guideline 3: Reducing imbalances in the euro area

Guideline 9: Improving the performance of education and training systems at all levels andincreasing participation in tertiary education

Guideline 4: Optimising support for R&D and innovation, strengthening the knowledge triangle and unleashing the potential of the digital economy

Guideline 10: Promoting social inclusion and combating poverty

Guideline 5: Improving resource efficiency and reducing greenhouse gases emissions

Guideline 6: Improving the business and consumer environment and modernising the industrial base

Europe 2020: 10 integrated guidelines

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Approaches to the regional /sub-national innovation issues

• Innovation Union Communication: – Transversal importance of regions & structural funds – Focus on preparing new programme generation (post

2013) with more trans-national openness and higher share for innovation & research

– Aligning structural funds more to Europe 2020 priorities

• Joint Communication 'Regional Policy contributing to smart growth in Europe 2020': – Improving impact on innovation under current financial

period and regulations– Prepare MS & regions for future programmes

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“Innovation Union”:Main areas of action with regional dimension

• Strategic and integrated approach to R&D and innovation by Member States and their regions

• Streamlining and simplification of EU innovation-related programmes

• State Aid framework

• Public procurement as innovation driver

• European Innovation Partnerships

• Modernisation of universities, research training and careers

• Launch of priority research infrastructures

• Benchmarks for research and innovation systems

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What is “Smart specialisation”?

best way to exploit territorial potential through innovation

foster interregional comparative advantage

= evidence-based (SWOT): all assets

= no top-down decision, but stakeholder discovery process

= global perspective on potential competitive advantage & potential for cooperation

= source-in knowledge, & technologies etc. rather than re-inventing the wheel

= priority setting in times of scarce resources (not "coffee for all")

= getting better / excel with something specific

= accumulation of critical mass = not necessarily focus on a

single sector, but cross-fertilisations

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Future Structural Funds (SF): Ongoing discussion

• Input from Evaluation of 2000-2010 period.• Which relationship with Europe 2020? • SF designed on geographic/territorial or sectoral basis?

What mix?– “Place-based” approach (“Barca report”), “regional” innovation,

…….– “Smart Specialisation”.– Role of “macro-regions” (Baltic, Danube….)

• Which sectors for which regions? – Infrastructure? (transport, environment, “green” energy)– Innovation and R&D?– Climate change, poverty, demographic changes, ……

• C

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Future Structural Funds (SF): Ongoing discussion-II

• What implementation and control systems?– Need for efficiency and sound management

of funds.– One system fits all? Case by case (EU27+)– Regional vs. national?– Subsidiarity (at EU, national, local level)

• What budget?– EU Financial Perspectives 2014+ to be

launched in 2011.

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Future Structural Funds (SF): Ongoing discussion III

• What does Bulgaria (and its regions and territories) want ?

– Identify needs in a pragmatic way– Establish your priorities– Draft your proposals– Make your alliances (with other

Member States)– Set up task forces and negotiation

teams of high skills– Be ready for the Council negotiations!

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Thank You !

e-mail: athanasios.sofos@ec.europa.eu

Useful web sites:

http://europa.eu/index_en.htm

http://europa.eu/pol/index_en.htm

http://ec.europa.eu/regional_policy/index_en.htm

http://europa.eu/policies-activities/funding-grants/index_en.htm

http://cordis.europa.eu/eu-funding-guide/home_en.html

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SLIDES TO DISCUSS ONLY IF TIME ALLOWS

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Scope of Innovation UnionEu

rop

ean

In

novati

on

P

art

ners

hip

s

Principles for • Member State policies

• International cooperation

• Governance

From Idea to Market

Knowledge

foundation

Breakthrough ideas

Access to finance

Innovation market

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From Idea to Market

Knowledge

foundation

Breakthrough ideas

Access to finance

Innovation market

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Knowledge foundation

• Issues Insufficient supply & quality of research & innovation

skills Limited reforms in universities Barriers to cross border flow of people, funding Limited investment in strategic infrastructures

• Areas of action ERA framework to remove obstacles to cross border

flow of people and funding Modernisation of universities, research training

and careers Launch of priority research infrastructures

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Breakthrough ideas

• Issues Underinvestment in knowledge Complex funding landscape Costly EU patent system and unused patents Little recognition of EU design strengths

• Areas of action Streamlining and simplification of EU programmes EU patent EU knowledge markets (DK and FR examples) Recognition of excellence in design

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Access to finance

• Issues Lack of finance is main constraint on innovative

companies Few European SMEs grow into major companies Specific market gaps for start ups, high growth

companies, major research and innovation projects Current EU instruments (RSFF, CIP Financial

Instruments) under funded.

• Areas of action Cohesion Funds for R&I and smart specialisation EU financial instruments to address market gaps,

notably through EIB/EIF State Aid framework

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A Single Innovation Market

• Issues Lack of harmonised regulations for innovations (e.g.

type approvals of green vehicles) EU standard setting too slow Public procurers lack incentives, knowledge or scale to

benefit from innovation

• Areas of action Regulatory frameworks linked to Partnerships Review of EU standardisation system Procurement for innovation

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European innovation partnerships

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European innovation partnerships

• Issues Major societal challenges Many actions, uncoordinated

- R&D programmes / demand-side actions- EU / national / regional (and global)

• To address these issues, European Innovation Partnerships will be: Not a new instrument alongside the others; but Frameworks bringing together main actors,

policies and actions at EU and national levels, from research to market, around common objectives and targets

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Principles for • National policies

• International cooperation

• Governance

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Principles for national policies

• Issues National policies essential for establishing a single

market for research and innovation National research and innovation systems more

effective if they share some broad characteristics, recognised as common to well-performing systems

« Integrated guidelines » under Europe 2020 are too general for this purpose.

• To address these issues, common benchmarks for national research and innovation systems could be developed and agreed with the Member States

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International cooperation

• Issues Need to attract best talents from abroad. Need for stronger cooperation, notably on global

challenges, but with level playing field on reciprocal access, intellectual property, interoperable standards, lifting trade barriers.

EU and MS weakened by their lack of coordination.

• Areas of action Make the most of visa directive and Blue Card Establish level playing field Common EU-national policy orientations for international

cooperation amongst major global research infrastructures

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Implementation and governance Commitment at all levels

European Council Overall steering

EU Council Policy orientations, codecision

Eur. Parliament Policy orientations, codecision

Member States Apply benchmarks, specialise smartly

Regional and local authorities Specialise and develop potential

All actorsFrom business to citizens

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Implementation and governance

Commission support

Initiative of proposals Annual Progress Report (Europe 2020)

with Country Specific Recommendations Independent peer reviews

of national systems Technical assistance

for smart specialisation Use of Structural Funds: programming, implementation,

reporting Innovation Convention on state of Innovation Union

(yearly) Scoreboard on research and innovation

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RESULTS FROM 20 YEARS INNOVATION IN THE EC

APPEARING ON SLIDE BUT NOT PRESENTED

IN THE WORKSHOP

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Conclusions (1): on the conceptual framework1) Innovation is not R&D…and just R&D is not Innovation: promoting innovation-led regional

development is not primarily about increasing R&D excellence and R&TD infrastructures (supply push) but first and foremost about a change of culture where efficient innovation systems (demand pull) mobilize the intellectual and entrepreneurial capacities to create an innovation friendly business environments, for SMEs in particular, in all regions and in all sectors (not just high-tech)

thus

The linear model (from R&D to the market) is much less relevant for policy design than the systemic or interactive model: not just patents but economic exploitation of talent and new ideas – not just industry and big firms with R&D but also services, competitive research and open innovation

because

Regional innovation capacities are much more about personal engagements, institutions, networks, cooperation (social capital) than it is about narrowly focused science and technology efforts: reinforcing triple helix – knowledge triangle, clusters and university-enterprise is key

Why?

Regional innovation for most regions in the EU is basically about knowledge absorption (education and training, advanced business services) and diffusion (technology transfer, ICT, entrepreneurship) than about knowledge generation (science efforts)

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Conclusions (2): on policy design

2. Innovation has a strong territorial dimension (tacit knowledge-networked economy) and there is no “one size fits all” innovation policy: regional diversity is an asset that advocates for different routes to growth through innovation – smart specialization

3. Regional Innovation Paradox: big need, big money and no capacity

4. It is no longer about what or why but about how and who?

Opening minds is more difficult than opening roads – need for much strengthen strategic planning capacities of regional/national governments (from design to ongoing learning evaluation) and facilitate a culture of risk taking

5. R&D excellence and Regional innovation are complementary and we need both: exploiting agglomeration and economies of scale is important (ERA) but also diffusion and absorption mechanisms based on regional potential

6. Beyond R&D expenditure and patents: we still do not have the required indicators for properly characterizing regional innovation potential or measure policy impact

7. Matching business demand (as a starting point) with RTD supply is vital

Microeconomic competitiveness problems can not be efficiently tackled by overdoses of macroeconomic or sector based policies but by integrated, place-based regional policies

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Conclusions (3): on the role of the public sector

8. Public sector should provide leadership and vision, rather than control, and catalyze economic development by promoting new ideas and partnerships with the private sector: not “for them but without them”

9. Support schemes must be long lasting, understandable and readily accessible by SMEs

10. Place-based regional innovation strategies and action plans integrating multilevel governance (national-regional) and horizontal (inter-ministerial) cooperation are a necessary first step

11. Grassroots ownership of innovation strategies are required: consultants are useful but not in the driving seat

12. Listen to Regional Development Agencies, Technology Centres, Technology Parks and Incubator managers, Technology Transfer Offices…they are soldiers in the front line

13. Venture capital, business angels, soft loans, guarantees…financial engineering better than grants and tax incentives although need for combination and a wide menu

14. Public procurement (green and innovation driven) is an important tool to consider

15. Innovation policies require risk taking, trial and error and sound evaluation on top of deep pockets and long lead times (political consensus a plus)