Croatia Must Urgently Establish a State Fund for Research and Development

The significant lag behind the world can only be somewhat reduced by the decision to increase allocations for R&D to at least two percent in 2015 and three percent in 2020.

writes Dr. Žarko Primorac
[email protected]

The Europe 2020 Strategy anticipates that allocations for research and development (R&D) will increase to three percent of GDP and at least 40 percent of the highly educated younger generation. These goals indicate a strong shift towards innovation and knowledge as the foundation of development, which is a consequence of the assessment that Europe is lagging behind the USA and Japan, as well as new powers like China. There are significant differences in the development of the innovation process among EU member states. Finland, Sweden, and Denmark currently allocate more than 3.5 percent of GDP for R&D, while Hungary, Bulgaria, and Romania allocate less than one percent.

Croatia Against Europe
In Croatia, processes are occurring that are contrary to European aspirations. While all EU member states are increasing investments in R&D, ours are declining. In 2005, approximately 1.22 percent of GDP was allocated, in 2009 approximately one percent, and the latest estimates indicate only 0.7 to 0.8 percent of GDP. As much as 65 percent of investments come from public funds, while the business sector contributes barely 35 percent. In more developed countries, the ratio of investment between the public and private sectors is precisely reversed: there, the business sector participates with about 70 percent. This is quite normal as the innovation process primarily serves to improve competitiveness.

Furthermore, developed countries concentrate investments in innovation on strategic goals. Modest Croatian investments are dispersed across many research institutions. There is no strategy. Budget funds only provide research institutions with cold operation (salaries and necessary material costs). Very few research institutions collaborate with the business sector. Research institutes generate only 10 percent of total revenue from collaboration with the business sector, while universities generate only six percent.

Other trends in our innovation process are also different from those in more developed countries. What to do? Croatia will become an EU member in 2013 and must start almost from scratch in this sector. First, it must determine what it wants to achieve with greater effort in the innovation chain. To achieve this, it must precisely define goals and measures for their realization. In other words, it must establish a development strategy for at least 10 years. Another radical decision is to increase allocations for R&D to at least two percent in 2015 and three percent in 2020. This would somewhat reduce the significant lag. Investment in R&D should be considered a productive investment. Of course, if other measures of rationalization and improvement of the innovation process are also implemented.

Without Knowledge, Time, and Money
It would be necessary to form a state fund for research and development that would strategically manage the innovation process. Those who think that such a fund could mean ‘nationalization’ of the market function should look at what the most advanced countries are doing. Finland, which invests about six billion euros in the innovation chain (15 times more than Croatia’s 400 million), leads a systematic, concentrated investment strategy. Croatia must improve the educational process, generally increase the number of students, especially in natural sciences and technology. In addition to these radical decisions, other parts of the innovation chain must certainly be improved: collaboration between researchers and the business sector, the establishment of knowledge and innovation-based companies, commercialization of technological solutions, collaboration with leading global centers of excellence, and the use of EU funds. All these programs require knowledge, time, and money. We lack all three factors. Nevertheless, we invest in knowledge. ‘Knowledge is expensive. If it weren’t, the poor would have it.’ Therefore, I conclude this contribution by paraphrasing that thought: let us invest in knowledge so that we do not become poor!