Science, Technology and Economic Development in South Eastern Europe

1
Science, Technologyand Economic Developmentin
South Eastern Europe

• Milica Uvalic
• University of Perugia
• UNESCO Conference
• Ljubljana, 28 29 September 2006

2
Introduction

• Why invest in science in SEE?
• Comparative overview of the situation in the ST
  sector in Southeast Europe (SEE)
• 2 studies prepared in 2005 UNESCO, Slovenian
  Ministry for HEST(SEE-ERA.NET)
• SEE 6 western Balkan countries Albania, BiH,
  Croatia, FYR of Macedonia, Montenegro, Serbia
  (excl. Kosovo)

3
Issues

• 1.Economic constraints on ST in SEE 2.National
  systems of ST in SEE
• (1) National policies
• (2) Investment in RD
• (3) Infrastructure
• (4) Human resources
• (5) ST output (patents, publications)
• 3.Why invest in science in SEE?
• 4.Policy recommendations

4
1.Economic constraints

• 1989 Transition in SEE, but break-up of
  Yugoslavia (mid-91) ?
• Political 5 military conflicts, UN/EU sanctions,
  international isolation
• Economic hyperinflation, very deep recession
  (drop of GDP of 80 in 3 years)
• Delayed transition and integration with EU
• ?Long-lasting consequences for SEE Cs
• Present economic features pose severe
  constraints on development of ST

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Economic constraints

• Low level of development Slow recovery after
  deep recession and recurrent crises
• 2000 onwards high growth rates, but slow process
  of catching up, some Cs still at 55-60 of 1989
  GDP (Serbia, BH)
• 2004 most SEE Cs GDP/head (market exchange
  rates)
• US 2000-3000 (20-32 of EU-25)
• Exception Croatia almost US7,000 (46 EU-25)

6
2004 GDP per capita (US) at market exch rates
and PPP
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Economic constraints

• Budgetary constraints posed by restrictive
  economic policies ? severe cuts in public
  expenditure (also RD, education)
• External accounts deficits non-diversified
  exports (labour-intensive goods), dependence on
  imported technology
• National savings investment low
• Limited FDI 1989-2002 SEE-5 attracted only 6.1
  of total FDI in 27 transition Cs
• FDI picking up only recently, yet

8
FDI, 2000-5 (billion US)SEE-5 annual FDI still
under US 5 billion
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2.National systems of ST

• Historical background Starting conditions in
  1989 very different
• More favourable in SFR Yugoslavia institutions,
  human capital, Universities (Zagreb 1669,
  Belgrade 1889), openness (intern coop, scientific
  exchange, travel)
• Albania traditional model, most closed economy,
  first University set up in 1957
• ?Important still today (institutions!)

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(1) National policies ...

• Reforms in course in all SEE Cs, also in ST and
  Higher Education (at variable speed)
• New laws on Science in all Cs ( HE), various
  government documents, drafting of national
  strategies
• Yet, delays in implementing changes/laws
• ST in the shadow of other priorities, lack of
  understanding of the importance of science

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National policies

• Reforms ? Major institutional differences
• BiH highly fragmented and decentralised system
  (?no RD policy at state level)
• Serbia RD decentralised, separate ST and HE
  institutions government policies
• Montenegro more centralised
• Croatia very centralised - one law for RD HE
  recent merging of the 2 Ministries

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National policies

• National strategies and key priorities
• Government documents ? define programs, specific
  tasks, multiple objectives
• Still, in most Cs no clear orientation regarding
  priorities (basic/applied research)
• No clear and realistic longer-term national
  strategy on RD (innovation Vs. imitation)

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(2)Investment in RD

• Economic constraints (heritage of the 1990s) ?
  science/RD/HE poorly funded
• RD expenditure generally low, but no data for
  Albania, BiH, Montenegro for Serbia partial
  (only government spending)
• Government prevalent source of finance
• Industry funds limited, also due to delays in
  privatisation (SM, BiH private sector share 55
  of GDP), limited links with universities

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Gross domestic expenditure on RD, GDP (GERD)
2003

• Croatia GERD highest - 1.14 of GDP, higher than
  in most new EU member states (exc. Czech Rep,
  Slovenia), even old (Italy)
• Serbia government expenditure 0.32 of GDP, but
  continuously rising - plans to increase RD
  spending to 1.4 by 2010
• Maced GERD even lower 0.22 of GDP
• BiH GERD estimated at 0.03-0.05 of GDP
• Albania, Montenegro no data on GERD

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Gross domestic expenditure on RD ( GDP), 2000-3
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GERD financed by industry?

• Business enterprises RD spending (as share of
  total)
• in 2004-5 data provided by only 2 Cs
• Croatia almost 40 of total (2003)
• FYR Macedonia only 12 of total (2003)
• Substantially less than the average for EU-15 (in
  2003 54.6)

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(3)Infrastructure

• Poor financial situation of RD institutions in
  SEE ? limited possibilities to modernise
  scientific infrastructure (purchase new
  equipment, modernise laboratories, libraries,
  ICT systems, Internet access, data bases)
• Still, big differences, richer countries
  (Croatia) better off
• Generally, inappropriate treatment of RD ?
  serious obstacle for more intensive research

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(4)Human resources

• Break-up of SFRY, wars, economic crises (1990s) ?
  dramatic effects for all Cs
• (1) Massive continued brain drain (loss of best
  experts)
• (2) Brain waste leaving RD professions for
  more profitable jobs (private or informal sector)
• RD professions unattractive low pay, no social
  status, no employment opportunities ? no
  incentives

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Human resources...

• Dramatic proportions of brain-drain
• Tirana University lost 40 of its academic staff
  in the 1990s (90 under 40 years old)
• Massive brain-drain also from BiH, Mac, Serbia,
  Kosovo (estimates vary)
• Departure of best experts, deficit of researchers
  of middle age generation

20
Human resources...

• Early 1990s general tendency of decreasing
  number of researchers in all countries
• Since 1997, trends on RD personnel extremely
  variable
• Albania, Croatia number of researchers
  scientists increasing
• Macedonia, Serbia number of researchers
  stagnating or declining
• BiH no statistics on total RD personnel (only
  on professors)

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(5) ST output

• Upward trends in technological and scientific
  output in most SEE Cs
• But for Albania BiH no data on RD output,
  no Patent offices
• Patents In most Cs the number of patents
  recently increasing
• Scientific publications Generally increasing,
  but associated with various problems, general and
  specific

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Scientific output

• General problems evaluation methods,
  non-existence of single databases, some fields
  (engineering) difficult to evaluate
• Specific problems in SEE years of isolation,
  non-inclusion of national journals into intern.
  data bases, limited international exchange
• Recently all SEE Cs ? improvement of systems of
  evaluation of scientific output

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3.Why invest in science?

• Overview ?Poor conditions of the ST sector in
  SEE countries
• Theory from Schumpeter onwards, innovation as
  driver of economic growth
• Modern growth theory
• Romer (1990) Technological progress as
  endogenous factor of growth, result of RD
• Aghion and Howitt (1992) competition in RD
  driving force of growth
• Grossman and Helpman (1993) innovation as the
  direct effect of RD investments

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Why invest in science in SEE?

• Empirical evidence importance of innovation for
  growth (e.g. Brasil, India)
• What drives innovation? GDP levels, trade, human
  capital, government spending, protection of
  intellectual property rights
• Recent empirical study (Trumbic 2006)
• The most significant variables for OECD
  countries RD spending and education
• For non OECD countries GDP per capita levels and
  investments in RD

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Why invest in science in SEE?

• In EU RD perceived as a key resource for
  competitiveness and long-term growth
• Transition to a knowledge-based economy
• Lisbon Barcelona European Councils
• RD spending ? 3 of GDP by 2010
• Industry-financed RD ? 2/3 of total
• European Research Higher Education Areas
• Innovation and information technologies
• Highly relevant for SEE Cs aspiring to join EU
  (though only Croatia negotiating EU entry)

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4.Policy implications

• ST sector in SEE progress in recent years, but
  a lot more could be done
• ?More appropriate policies needed to prevent an
  increase in the ST gap between the SEE Cs and
  more developed countries
• National policies
• International

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Policy implications

• National policies
• Raise public awareness about the knowledge-based
  economy (key role of innovation and technological
  progress)
• Change present inappropriate treatment of RD
  (marginalisation of science)
• Increase expenditure on RD
• Facilitate links between industry and
  universities, encourage networks
• ? Government measures needed in all areas

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Policy implications

• Right balance between restrictive macroeconomic
  policies those with long-term effects
  (competitiveness) ?investing in human capital,
  education, life-long training, requalifications
• Attract more FDI, by further improving business
  environment, decreasing country risk
• Improve statistics (data collection)

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Policy implications

• International
• Constant renewal of links of SEE Cs since 2000
  (international, regional, bilateral donors
  support), results clearly positive for ST
• Participation of SEE Cs in EU 5th, 6th, 7th FP,
  COST, EUREKA, TEMPUS, gradual integration into
  European Research Area
• Regional networks in RD (?)
• International assistance in ST remains important
  in the medium run - much more could be done

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Policy implications

• Making all SEE Cs eligible for EU programs
  reserved for candidates (as recently done with
  e.g. EIBs Innovation 2000 Initiative)
• Still today limited funds for longer-term
  research, or researchers mobility
• Donors aid often short-term, no interest to
  invest in certain key areas (ST infrastructure,
  modernisation of laboratories)
• Better matching of donors financial assistance
  national priorities

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Policy implications

• Longer-term strategy on ST in SEE, also in a
  regional context
• Each SEE country innovation Vs. imitation
• Potential for innovation and specialisation in
  specific sectors
• Desirability of transferring technology from
  abroad (also through FDI) in other sectors
• Importance of international support in this
  regard (learning from western experience)