Commissioner Janez Potocnik: EU R&D Innovation: Opportunities for SMEs Conference “SME in the R&D Framework Programme”

Kortrijk, 23 May 2006

Conference “SME in the R&D Framework Programme”
Kortrijk, 23 May 2006

Dear Minister,

Ladies and Gentlemen,

Thank you for inviting me here today and for giving me the opportunity to visit this dynamic region.

Kortrijk is a town with a great history and many famous citizens. It is perhaps appropriate, in the context of my talk, to mention the name of two of them.

The first one is Jan Palfyn, born in Kortrijk, became a famous doctor, surgeon and the inventor of the forceps – and he did this without research funding.

The second one is Vincent Van Quickenborne, Belgian Secretary of State with responsibility for simplification of the administration. “Simplification” is a word I will return to.

Kortrijk is a dynamic city with a solid entrepreneurial image and flair. It also has a pragmatically European approach, working closely together with the French neighbours of Lille and northern France.

The presence of institutions such as the High School West Flanders where we are today is a further strong asset.

Working in close association with the University of Gent, this centre for applied research has strong potential for supporting the development of companies in this region.

I accepted this invitation today also because I wanted to see how this High School develops its links with SMEs.

Two weeks ago, the European Commission published a policy paper on the modernisation of our universities and our higher education establishments.

This paper, which was requested by the leaders of Europe’s governments, puts great emphasis on the cooperation between universities and industry as a priority for Europe.

Just last week, the Commission launched a public consultation on possible actions to improve cross-border cooperation and knowledge transfer between public research organisations and industry. Based on the input we receive, we will come forward later in the year with concrete proposals in this area.

All this is part of a wider programme to improve the framework conditions for research and innovation in Europe.

We are, for example, revising the state aid framework to make it more research and innovation-friendly. We will promote a better use of public procurement to support innovation. We intend to come forward with proposals to create lead markets for technology-intensive goods and services. We will soon conduct a review of the single market to see how we can foster innovation and entrepreneurship.

In short, our ambition is to create a true knowledge-based economy.

Doing that is no longer a matter of choice, it has become a necessity in the face of global competition, quickly changing business environments and increasingly demanding consumers.

If we want to sustain our prosperity in a socially and environmentally responsible way, we have no choice than to invest in our greatest strength: knowledge.

This is why the first priority in the so-called European Lisbon strategy is knowledge and innovation for growth.

The target of spending 3% of our GDP in research and development is emblematic of this priority. I am glad to see that also Belgium and Flanders have committed themselves to reaching this target.

We have to know better and know more than our competitors; and we have to transform that knowledge into commercial success.

In other words: research, education and innovation: the three activities that take place at the centre where we are today.

The awareness of the importance of innovation is now widespread.

Just recently, I was presented a study from VOKA on how being unique is profitable.

The key message I retain from that study is that in order to be successful in innovation, companies (and research centres by the same token) should collaborate and be internationally active.

This is precisely what the European Union wants to stimulate with one of the main funding programmes to help create the knowledge economy, namely the Research Framework Programme.

These Framework Programmes, just like the Flemish research and innovation policies, have always had a special attention for the innovation potential of SMEs.

One of the very popular programmes is that for cooperative research, in which we fund research and development work performed by research centres to help three or more SMEs from different countries that have a similar, very specific problem or opportunity.

This programme is not unknown to SMEs in West-Flanders. As of December 2005, our data show that 5 West-Flemish SMEs participate in such a European research action in the current 6th Framework Programme, which started in 2003.

Let me give you one concrete example of such a project. Our brochures usually mention a success-story with a participant from this region, namely the company Delvano.

That company, together with Ecospray Technologies and other partners from Italy, the UK and the Netherlands, received EU support to have a new methodology developed for them in order to deposit pesticides in a more homogeneous and economic way.

The attention for the potential of SMEs will continue, if not reinforce, in the next Research Framework Programme, namely the seventh which is due to start at the end of this year for a period of seven years.

The total budget for this 7 year Framework Programme, covering all EU research investments, has already been agreed: €54,5 billion for supporting scientific and technological excellence in Europe.

This represents, in annual average terms, an increase of 60% in current prices compared to the current Sixth Framework Programme.

The Seventh Framework Programme has a simple and clear structure, based on 4 principal programmes:

• The biggest in budgetary terms (60%), called Cooperation, has the ambition to help Europe gain leadership in key areas of science and technology by having our best brains from across Europe working together. In this programme, industry will play a strong role in defining industry-relevant topics for EU research support. We are working closely with industry through technology platforms, which bring together all stakeholders in a specific sector under the leadership of industry. The question of how best to involve SMEs and benefit from their innovation potential is consistently on the agenda.
• The second programme is called Ideas (14% of the total budget), to foster competition and excellence in frontier or fundamental research.
• The third programme, People (9%) is to enhance the mobility and career development of researchers, including with industry and SMEs.
• The fourth programme is Capacities (8%), to ensure scientific and technological capacity-building, for example in the area of infrastructures or in helping new Member States to gear up their scientific potential. It is in this Capacities programme that we foresee an average increase of 54% in current prices in the budget for cooperative and collective research for the specific benefit of SMEs.

My colleague from DG Research will present later today the concrete opportunities that the 7th Framework Programme will offer for SMEs.

But let me reassure you that we will do what we can to help SMEs.

We do not like the setting of a quota or target for SME participation, like the Council of Ministers has proposed. This brings all kinds of artificial and bureaucratic processes into motion without really benefitting the best SMEs that we are trying to get in our programmes.

I have found solid support for this thesis in Minister Moerman.

There are many other things we will do to help SMEs, based on a clear distinction of different kinds of SMEs, their particular needs and what they can contribute to Europe’s competitiveness.

A high-tech SME that operates at the cutting edge of science is very different from an SME that needs a technological solution to expand its business.

In FP7, our ambition is to present clearly structured and easy to understand work programmes. In this way, potential participants, particularly SMEs, should be well informed on the opportunities in the Framework Programme that match their specific needs and interests.

We may launch calls for proposals in different thematic areas on topics that are dedicated to SMEs.

But the most important factor for SMEs will probably be our efforts to simplify our rules, procedures and administration.

From the first days that we starting conceiving the 7th Framework Programme, I established a sounding board of representatives from smaller research organisations, including SMEs and universities, to advise me and my services in real time on all aspects relating to implementation rules.

My thinking was, and continues to be: if we can make life easier for the smaller actors, the life of others will also be easier.

Contrary to what many people believe, simplification is not just a technical issue, it entails numerous political choices that need to be addressed as well. The simplification measures envisaged will cover the entire funding cycle, including funding schemes, administrative and financial rules, procedures, readability and user-friendliness of documents.

Under the current Framework Programme, the principle of collective financial responsibility is a particular problem for SMEs, particularly in collaborative research. SMEs are often confronted with demands for expensive bank guarantees. We propose to drop collective financial responsibility in the new Framework Programme and to replace it with a guarantee fund, which would cover the financial risks of defaulting project participants.

The normal EU contribution for industry participants is 50% of the total cost of the project. For SMEs, we have proposed that the EU contribution is increased to 75% of their costs of participation. This should make it much more attractive for SMEs to participate in the Framework Programme by lowering their financial burden.

Real simplification means giving researchers and entrepreneurs a higher degree of autonomy and flexibility. But the Commission can only do that if its political masters, Parliament and Council, allow this to happen and if we are willing to accept a tolerable level of risk in executing the EU budget.

If we can reduce the need for reporting, for financial controls, audit certificates and bank guarantees, the direct consequence will be more money going into research.

Minister Moerman has always been a good ally in supporting our proposals and I hope she will be able to support our proposals at the Competitiveness Council next week, where she will represent Belgium.

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Ladies and Gentlemen,

Politicians and policy-makers have long known how vital SMEs are to the European economy. 25 million or so SMEs account for close to two-thirds of Europe’s employment and GDP.

Therefore, it comes as no surprise that SMEs are a key component of research and innovation policies. SMEs are often better positioned to exploit new and emerging research opportunities that address ongoing social, environmental and economic challenges.

EU actions for SMEs will never be sufficient on their own.

Given that geographical proximity is an important factor in SME operations, national and regional support remain essential to enhance their competitiveness.

Most Member States have SME specific support actions, but they are not geared towards the promotion of trans-national cooperation, which is becoming increasingly important for those SMEs wishing to internationalise their activities.

SME actions at EU level are necessary to complement the support provided at national and regional level.

Successful SME participation in the Framework Programme is also determined by the extent to which national and regional administrations organise themselves to help their SMEs participate in the Framework Programme.

A well performing network of national contact points is crucial, but also additional programmes to support SMEs’ international collaboration outside the direct realm of the Framework Programme.

That is why we have identified in our proposals possible support to a promising EUREKA initiative, called EUROSTARS. EUROSTARS is designed to have national authorities to coordinate and pool their resources in order to support trans-national, multi-partner R&D projects initiated and led by R&D performing SMEs.

Currently twenty-one EUREKA countries have agreed to participate in the programme with another twelve indicating their interest in joining.

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Ladies and Gentlemen,

Europe is big for SMEs. The European Research Framework Programme is big for SMEs.

But the opportunities they offer for SMEs are equally big.

The new 7th Framework programme is designed to be even more inclusive for SMEs than its predecessors.

It will be complemented by other programmes, such as the Competitiveness and Innovation Programme (CIP), which will focus on a range of activities downstream of RTD and in improving SME access to alternative sources of finance.

Also the structural funds, in their different funding streams, will offer many opportunities for SME support.

If this is complemented by a strong political will to play the European game and by a solid entrepreneurial spirit to succeed in the European market place, we can be confident in the future of Europe as a competitive region where it is good to live.

As politicians, we have the responsibility to improve the framework conditions for research and innovation and to design funding programmes that meet the needs of researchers and entrepreneurs.

But researchers and entrepreneurs make it happen.

That is my call to you today: let’s make together the European knowledge economy and society. Let’s create optimal framework conditions. Let’s make it happen.

Item source: SPEECH/06/322 Date: 23/05/2006