EIB Annual Forum 2005
Helsinki, 28 October 2005
President Maystadt, Excellencies, Ladies and Gentlemen,
Finland, one of the top research-intensive countries in the EU, is an inspiring place to talk about the creation and the dissemination of knowledge.
What is more, the theme of this year’s EIB Forum shows the growing role played by the EIB in funding research projects and infrastructures. This is very good and I am particularly happy to note the very good cooperation so far between the Commission and the EIB in the field of research, in particular as regards the future Risk-Sharing Facility.
This is part of the increasing importance that the European Union is now giving to research and innovation as the keys for our competitiveness and prosperity.
My colleague Günter Verheugen will have outlined to you yesterday how this is reflected in the new Lisbon Partnership for Growth and Jobs.
For my part, I will try to develop my reflection around the main topics of this session, namely
- the investment into research as the major knowledge creation mechanism,
- the link between the research and innovation as the main mechanism for the dissemination and use of the knowledge created.
We all know that knowledge and innovation have been singled out as one of the three main areas that can bring economic growth and jobs to Europe. They are among the areas that call for immediate action within the renewed Lisbon Strategy.
Why is this so?
First, all economic studies show clearly that investing in research and innovation has a positive impact on economic growth. Recent studies show that each extra percent in public investment into research brings 0.17% of additional growth of productivity. Another study showed that increase in R&D intensity by 0.1% boosts growth by up to 0.4 %.
My second argument points more to the external nature of the problem Europe faces when compared to its competitors. May I say very clearly that as regards the investment into research and innovation, the classical Triad situation comparing EU, USA and Japan where Europe is comparatively worse-off in its efforts on R&D, needs to be replaced by a much wider context of global competition for research funds. I am sure you are aware that some developing countries are increasing their research intensity by levels which are almost unimaginable in the EU. In some years, we will see China for example, spending the same part of its GDP on research as the EU if the current trends continue. Should we not call this a moment of truth for the EU? I think yes.
Why am I repeating these facts and figures which may be all too familiar to you? To make us once again aware that we need to face the reality and be proactive in our respective research policies at all levels. We need to invest more and we need to invest better. And above all, we need to create real tangible links between research and innovation so as to enable technology transfer into the industry as well as between research and other economic policies. In fact, we need a new paradigm in which the dimension of knowledge creation and use is an essential dimension of every sound and sustainable economic policy.
I turn now to my second point which concerns the link between the research and innovation policy.
Research and innovation are of course not the same thing but they are very closely linked and interact in a number of ways. They address different but complementary factors that cover the whole spectrum of knowledge creation, use and its commercial exploitation.
In the past, EU was looking at these two policy fields in a separate manner. What we need however is an integrated look that covers all dimensions of the regulatory and administrative environment that incites research and innovation, that brings together the research, industry and financial markets, that facilitates public-private partnerships and also exploits fully the trans-national synergy. After all, this is one of the major value added tools of our policies at EU level.
Allow me to use at this stage my first example of such an integrated approach, namely the new Communication on “Research and Innovation”, adopted by the Commission on 12 October.
What we tried to achieve with the Communication was the following:
First objective: Upgrade research and innovation in policy agendas
Some of our actions are already well known, for example to redirect State Aid towards horizontal objectives like research and innovation.
We will have an equally important action to redirect public procurement. Our goal here is to change the way public procurement is used in order to be more open to new technologies, better satisfying the needs of public authorities and at the same time stimulating research and innovation to feed those new technologies.
Another instrument which is steadily gaining momentum is tax incentives. More and more countries in Europe have developed tax schemes for research and innovation: France, the Netherlands, the UK, Spain, Hungary, and many others. In some countries they now represent a substantial percentage of total public support to business research.
The problem is that these schemes have been designed with a purely national perspective. As a result, some schemes are discriminatory towards research contracted in other European countries. These schemes have to be changed – and some have been already, for example in France and in the Netherlands. But we still need to provide clear guidance to help Member States ensure that their tax incentives fully comply with internal market and competition rules.
This is not just a legalistic matter. Countries that would exclude from their tax schemes the research outsourced to organisations from other Member States, would de facto deprive their economy of the benefits of the integrated European Research Area – their businesses would be discouraged from looking for the best research across Europe. No national economy can afford such a loss.
In addition, there is much to learn from the best practices experimented in various countries. And greater consistency across national schemes would make it much simpler and more attractive for large international companies to invest in research in Europe.
So we will adopt next year a communication giving guidance to Member States on the most effective ways to design tax incentives for research and innovation.
Second objective: Mobilise EU funds and instruments to support research and innovation
Our proposals for the Research Framework Programme and for the Competitiveness and Innovation Framework Programme are already well known and the Communication highlights the most relevant new instruments that we have proposed.
The structural funds play an essential role for capacity-building for research and innovation all over Europe: research and innovation are one of the main objectives of the future structural funds.
Third objective: Improve the environment for business to do research and innovate
There is much to do on that count. I will limit myself to two important examples.
The first one concerns one of the clear weaknesses of Europe which is that our universities and business find it hard to cooperate with each other, in particular across national borders. Some of the main issues relate to contractual negotiations, notably how to deal with intellectual property.
We have been working with some of the main stakeholders to identify best practices. Based on this, we will in 2006 propose guidelines for cooperation and knowledge transfer between public research and industry.
These guidelines will provide a solid and agreed basis for contractual negotiations that will considerably facilitate cooperation, particularly at trans-national level.
I see this as a level playing field for universities and businesses to create strong knowledge-based partnerships across Europe.
My second example concerns the so called Risk Sharing Finance Facility which is a joint Commission/European Investment Bank mechanism under FP7 whose aim is to encourage more private sector investment into research and development. As you know, we propose that a part of the FP7 allocation, instead of being consumed as a grant, is invested at the European Investment Bank so as to facilitate access to loan financing for large European research projects. The aim of this is to recognise that only the financial markets have enough funds to fill up the gap that exists between the current investment into research and the 3% objective. The leverage effect is expected to be significant: 1 euro of Community funds allocated to the scheme could generate between 4 and 6 euros invested in European research projects. I think this is the right step into the right direction and hope this instrument would be widely used by the European finance sector and the industry once FP7 is adopted.
Fourth objective: Enhance national policies through trans-national cooperation
As you will all be aware, most of the regulations and public support for research and innovation remain at the level of Member States.
So, it is essential that national policies are developed in ways that are as consistent and mutually reinforcing as possible, even though they must clearly be adapted to the national situations and priorities.
For this reason, the Communication presents a number of initiatives that we are going to take to increase coordination and cooperation between national programmes and policies. These range from mutual learning to joint programmes and policy initiatives, which in some cases the Commission will support financially.
The issue of financial support now brings me back to the Research Framework Programme, which is one of the main tools for delivering the objectives listed above as well as more general to the importance of financial support to the Lisbon strategy and knowledge in the next Financial Perspective.
As you will know, successive framework programmes have seen substantial increases in terms of budget, and also in terms of scope and ambition.
Yet to keep pace with the changing world and maximise the impacts of European level financial support, the Commission believes a substantially more ambitious approach is needed for the future. The proposals for the 7th Framework Programme, presented by the Commission in April, match this ambition and are for a programme worth some 70 billion euro over seven years.
Despite the lack of agreement on the overall EU budget, the Commission remains committed to a substantially increased Framework Programme as a priority. I believe that if we are to remain credible, we need to match our policy priorities with tangible proofs. What we need is a growth-oriented budget of the EU for the next Financial Perspective and we can achieve this only through giving a clear priority to Lisbon related spending.
So what happens next? As you know Europe faces major questions concerning its future direction which impact heavily on the negotiations on financing of the EU for the period 2007-13, and hence the budget for the 7th Framework Programme.
The Commission, for its part, has been clear. The budget must be re-orientated towards Lisbon objectives, and we have proposed a major increase in the research budget.
As you know, the decisions on the framework programme are made by the Council and the European Parliament.
The Commission intends to play as strong and constructive a role as possible and last week we came forward with our own contribution to help kick-start the negotiation and help to ensure that a successful conclusion is reached in December.
We will continue to argue for a substantial increase in the research budget at both EU and national levels, which we consider absolutely necessary if we are serious about transforming to a knowledge economy.
What Europe needs are tools to deliver its policies that can bring growth and jobs throughout the Union. If we are to remain credible, we need to match our policy priorities with tangible proofs, that is a growth-oriented budget of the EU for the next Financial Perspective.
Ladies and Gentlemen,
With these two proposals – the Communication “More research and innovation” and the 7th Research Framework Programme, we have two of the main elements for implementing the “knowledge and innovation” pillar of the Lisbon strategy.
In both cases, we are still at the stage of proposals. There is intense work ahead of us. You can rest assured that I will work my hardest to get our proposal for the next Framework Programme through in order to make these proposals a reality.
I count on your support in this effort.