Erkki Liikanen: "Research beyond the 6th Framework Programme", European Research 2002 Conference, Brussels, 13th November 2002

European Research 2002

Ladies and Gentlemen,

It is a great pleasure for me to adress such a distinguished audience of Europe's most eminent scientists and researchers.

The record number of participants to this conference is a very encouraging sign of the interest the European research community has on the new framework programme. This was also confirmed by the success of the IST 2002 conference we organised in Copenhagen a week ago.

The objectives set for European Research extend beyond the 6 th Framework Programme. They directly address some of Europe's main political priorities: These are:

• to improve our economic competitiveness;

• to close our productivity gap, and so

• to build-up sustainable economic development.

Innovation and research are also essential elements of the policies we are pursuing in the field of Enterprise and the Information Society.

Much progress can be accomplished through the application of state of the art technologies.

We expect all research funded as part of the Framework programme to have an impact on Europe's economic performance. We also need to ensure that technology serves the needs of citizens and of business.

Let me begin by presenting to you the general economic situation we face in Europe today. I will then illustrate the impact that research can have on this.

Economic situation

At present, GDP per head in the EU is less than 70 per cent of the US level. The past 25 years show many cyclical fluctuations in our standards of living. There has been no catch-up of the higher US incomes.

The gap in living standards reflects a weaker employment performance and lower productivity. Let me concentrate on the latter issue.

This graph shows the trend in relative productivity (or average output per employed person) between the EU and the US. The long period of European catch-up came to an end around the mid-1990s. In the past few years, our productivity gap has widened again.

Economic growth relies on productivity gains. For wage earners, increased productivity creates room for increases in real wages. For firms, productivity growth implies enhanced competitiveness. For governments, increased productivity in the economy generates a larger tax base from which to finance public expenditures.

The European Commission's 2002 Competitiveness Report associated the following factors with higher productivity growth:

• Research and innovation . This leads directly to new products and more efficient production methods, and so has a strong link with productivity growth.

• Use of information and communication technologies : provides a competitive edge by shortening reaction times and improving efficiency. To really benefit from ICT, firms and governments need to re-organise themselves, and to update the skills of their employees.

• Skills and human capital. High-productivity sectors of the economy usually employ people with higher skills. The general levels of education across the population need to rise, and we must make sure that such knowledge and skills are put to use in the labour market.

Research and development

This graph illustrates the leverage that R&D has in different manufacturing industries in the EU. The main manufacturing sectors are plotted on the graph, according to their percentage investment in R&D and their productivity growth rates.

In general, sectors with high R&D investment are also those with the highest productivity growth. Bio-technologies, nano-technologies, space and aeronautics are good examples of fields in which Europe's industries already excel. We must continue to build on such strengths.

Research therefore, is extremely important. If we can apply the technology and knowledge that results from research we can improve Europe's productivity.

If we improve Europe's productivity, our competitiveness in global markets will also improve and so we achieve sustainable economic growth.

At the Barcelona Summit last March, Europe's Heads of State and of Government agreed that that overall spending on R&D and innovation in the Union should be increased to 3% of GDP by 2010, with two-thirds of this investment coming from the private sector.

Europe's leaders have thus made a very clear long-term commitment to R&D. In doing so, they have also acknowledged the key role that private sector investment in research will play, in securing our long-term economic future.

The European Research Area can effectively draw together both public and private sector investments in research, and focus this on major policy priorities - like improving Europe's economic competitiveness.

Application of Information and Communications technologies

A second factor for improving productivity growth is the take-up and use of information and communication technologies or ICT.

The economic forces driving advances in ICT lie not only within the ICT industries themselves, but within all other sectors of the economy.

It is no accident therefore, that IST research is the single largest part of the 6th Framework programme (It is 28% of Integrating and Strengthening the ERA, and 22% of the overall Framework).

The state-of-the-art ICT is essential, not only for economic competitiveness, but also for supporting major scientific advances in all fields of research.

Before the widespread introduction of ICT, the costs of processing and transferring information were considerable. This led to hierarchical organisation structures, which minimised the volume of information to be transmitted. Production processes were adapted to the mass-production of relatively simple and standardised goods.

Information and communication technologies have made the production process more flexible. Logistics and marketing functions have been transformed, resulting in smaller inventories and lower working capital.

All of these productivity gains require organisational change. New management cultures have fewer hierarchical levels and more transparency, with all staff expected to participate actively in the development of the firm's activities.

To encourage a rapid and widespread take-up of information and communication technologies, the Commission has established an eEurope action plan. Earlier this year, its second phase was launched - the eEurope 2005 action plan.

This focuses on improving on-line public-sector services in key sectors such as eGovernment, eHealth and eLearning. The plan encourages wider introduction of state-of-the-art technologies, and also the organisational changes necessary to properly take advantage of these.

An individual citizen or enterprise should be able to interact with just one "portal", behind which all of the necessary government departments are seamlessly connected as the supporting "back-office".

The eEurope Action plan continues to drive forward the deployment of a broadband communications infrastructure throughout Europe, and the improvement of network security. IST research is contributing directly to all of these eEurope goals, by developing technologies for deployment in the longer term.

Innovation

Research, and the effective use of ICT - are two of the key factors in our quest for productivity and competitiveness.

If someone were to ask me "what is the secret for successfully applying research results?" I could answer in just two words "Innovation" and "Entrepreneurship."

So how can governments help to encourage innovation?

Firstly , by creating competitive markets that give incentives to firms to develop new products and more efficient production methods. Research initiatives need to be closely linked to policy initiatives.

Enabling regulation encourages the development of new markets that can keep pace with rapid technological development.

Secondly , entrepreneurs need sufficient protection of their intellectual property rights. In this context, the slow and difficult path towards a practical and cost-effective Community patent is highly regrettable.

Thirdly , an innovative economy needs people with new ideas and willing to take risks. Europe depends on its entrepreneurs and the small businesses they create.

Fourthly , innovation depends on flows of knowledge and interactions between research, industry, entrepreneurs and sources of capital. Public authorities can encourage the networking and clustering of players in the innovation process, and also increase collaboration between government-financed initiatives and the private sector.

The European Innovation Scoreboard, which we will publish for the third time in a few weeks, highlights strengths and weaknesses of national innovation performances. In many of the indicators used, EU countries are also world leaders in innovation.

These "best practices" need to be shared and progressively taken up by all European Countries.

Skills and Human Capital

Europe's most valuable economic resource is its People, and the skills that they have.

The European Scoreboard shows that those countries that invest most in Life Long Learning are also those that tend to perform best in innovation. As technology develops, so must the skills base of people in industry and the service sector that seek to apply it effectively.

A lifelong commitment to learning brings a readiness to accept change. Both of these are essential if advances in technology are really to bring about improvements in productivity.

Enlargement

In the context of research and developing the human capital of Europe, we must not overlook the challenges and opportunities presented by enlargement of the Union.

Inside the Framework Programme, researchers from the accession countries and those of the Member States are equal partners. Special measures have been put in place to help the accession countries bring their vast human capital for research into closer collaboration with that of Western Europe.

This year's European Innovation Scoreboard includes the accession countries for the first time. Some accession countries are already implementing national innovation policies, building on their specific strengths and seeking to overcome any specific weaknesses.

The accession countries share in the goals of the eEurope Action Plan. They are already working to change their institutional framework and business practices to take full advantage of modern technologies, and to unleash their full human capital potential.

Returning to the theme of this session

To conclude, the objectives we address through European research extend far beyond the Framework Programme. The thematic research priorities you are addressing can all be applied to improving European productivity and competitiveness.

Structural elements of the Framework Programme address innovation, the development of human capital, and the growth of international participation.

The European Research Area strengthens the relationships between European research and national and industry-led initiatives. New instruments help to focus and integrate research on specific objectives.

These objectives all lie outside of the research framework, and in the mainstream policy arena of Europe. For your research effort to have a lasting impact on Europe's economy, we all have our part to play:

• As researchers;

• As governments and businesses (the stakeholders) by increasing levels of investment in research and by a determination to reap the economic benefits this can bring;

• As citizens of Europe, seeking improved standards of living through life-long education and a willingness to embrace change.

Thank you very much for your attention.

DN: SPEECH/02/569 Date: 13/11/2002