Philippe Busquin: What next to consolidate a competitive and innovative Europe? European Business Summit Brussels, 7 June 2002

Brussels, 7 June 2002

Introduction

The Lisbon European Council of March 2000 is a turning point in recent European Union history.

It set an ambitious objective, not out of reach

Europe must become "the most competitive and dynamic knowledge-based economy in the world".

A key component of this enterprise is the creation of a European research and innovation area:

It is a project which will improve the overall efficiency of European research efforts.

It has become the reference framework for research policy in Europe since two years.

The objectives are:

To create a true research "Internal Market", allowing for the free circulation of researchers, knowledge and technology.

To move towards a better co-ordination of national research activities and policies (80% of the overall European research effort).

It will lead to:

A more efficient allocation of resources;

A better use of research results;

To more cohesion including East/West dimension

And better productivity and growth.

It is an enterprise at the scale of the European continent: candidate countries and non Union west European countries are fully associated through their access to the Union Research Framework Programme and their association to European research area activities.

European research has:

A web of high level research institutions and business centers;

A good scientific base in many science and industry fields.

But it has also weaknesses: fragmentation of the activities, dispersion of resources, duplication and overlaps, comparatively too little investment in technological research, a lack of skilled human resources,

And, above all, a weak financial effort.

Since many years, the European research effort stagnates at 1.9 of Union's GDP.

The efforts of the other big technological powers are continuously rising: 2.6 of GDP in US today, 2.9% in Japan.

The investment gap with US today is about 80 billion Euros per year, and is growing rapidly.

90% of this gap comes from the difference in business-funded research.

The reasons are diverse:

Big European enterprises in research intensive sectors (pharmaceuticals, aeronautics) invest in research as much as American firms: 10% of their turnover, and even more.

But they do more and more research outside the European Union.

The weight of traditional low-tech sectors remains important in European business.

Finally, there are far less High Tech small enterprises (spin off, start-up) than in the US.

The Barcelona European Council, in March 2002 has addressed this challenge and has fixed a target:

The overall spending on R&D should be increased with the aim of approaching 3% of Union's GDP by 2010. Two thirds of the global effort should come from the private sector.

Today, private European investment in research represents only 55% of the overall European research effort:

Europe must therefore become more attractive for companies to invest in R&D. No enlarged European economy will be viable without a strong EU research effort.

In the coming weeks, I will present a Communication on this issue and initiate a broad debate with the industry, the scientific communities, the world of finance, the Members States and the European Parliament.

It will be a major opportunity

to design more attractive framework conditions for business-funded research,
and to improve the available mechanisms for encouraging the business-funded R&D in Europe.

Better framework conditions include the following elements:

A strong public and academic research base with improved links with industry:

We have to re-think the key role of universities in the Knowledge-based economy and the European research area.

Appropriate intellectual property rights regimes:

We need to finalise the negotiation and implement quickly the Community patent.

Efficient structures of technology transfer:

Specific provisions in public funded programmes should focus on science and technology parks and better technology transfer.

Better regulation:

The Commission has just decided to review and simplify existing and planned legislation hampering the introduction of new products and services.

Human resources are also a key issue. Europe shows:

A comparatively low number of researchers, in particular in the business sector: 2 per 1000 compared with 7 in US and 6 in Japan;

Worrying demographic perspectives: 1/3 of current researchers due to retire in the next 10 years;

A low level of researchers' mobility.

This is a crucial problem that public authorities, education systems, research organisations and industry have to address jointly.

We have to eliminate legal, bureaucratic, practical, linguistic and cultural obstacles to mobility.

And take into account the specific needs of candidates countries (mobility grants and re-integration grants have been included in the recently adopted Community research framework programme).

Member states and the Union must work jointly towards more efficient funding mechanism for business RD

So as to increase the leveraging effect on RD industry's own efforts.

State aids should be re-directed towards horizontal objectives including RD and the opportunities of the State aids Community framework should be fully examined;

The efficiency of existing support mechanisms should be reviewed (as it has been done for the Community Research Framework Programme).

Fiscal incentives: the effectiveness of existing mechanisms and the new approaches taken in a number of countries should be reviewed and best practises identified.

The merits of other funding mechanisms should also be assessed (EIB/EIF provide good example):

Guarantee mechanisms (especially for SMEs): they have usually high leveraging effects.

Support for capital risk: it is most necessary in the early stages of development.

Achieving the "3% Objective" will be a joint effort of all concerned. We have to work with industry and other stakeholders to make the Lisbon goal come true.

It will require a combination of:

Specific measures to be defined and implemented jointly by public authorities at European and national level, including benchmarking of innovation and research performances and policies;

Measures and initiatives currently implemented or foreseen in the European research area approach, in fields such as the mobility of human resources or the stimulation of the regional innovation potential;

Candidate countries should be key partners from day one. I invite entrepreneurs from Candidate Countries to join this policy debate

The wider international dimension should be fully taken into account. Europe has to be an attractive place for researchers and investment from third countries.

The business sector has a key contribution to make. And I look forward to your contributions

More business decisions to invest more in RD are necessary to achieve the Lisbon objective, for Europe to become: "The most competitive and dynamic knowledge-based economy in the world".

DN: SPEECH/02/268 Date: 07/06/2002