Czechs ready to spend 3% of GDP on R&D

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Applying the EU's target of raising investment in R&D to 3% of GDP by 2020 is seen in the Czech Republic as attainable, even at national level. Surprisingly, the caretaker government proposed a 2.7% national target, higher than the more modest 2.3% proposed by the European Commission. EURACTIV Czech Republic reports.

The target, proposed by the Commission in its 'Europe 2020' strategy', of raising investment in R&D to 3% of the EU's GDP is seen as applicable within the Czech Republic by the caretaker government led by Jan Fischer, himself a former statistician.

Although the position of the future government – currently being negotiated following the 28 May general elections (EURACTIV 31/05/10) – could potentially be different, the new cabinet will most probably form after the upcoming European Council summit on 17-18 June.

It will therefore be the caretaker cabinet that is involved in the negotiations.

Czech officials have set a national target of investing 2.7% of the country’s GDP in R&D by 2020. ''Draft documents that have been prepared for discussion by the government would not embrace such a goal if they did not believe it to be attainable by 2020,'' said Tomáš Bouška, a spokesperson for the Czech Ministry of Education and Sport.

Prague more ambitious than Commission

As the EU's 3% target is expected to be broken down into individual national goals reflecting countries' different starting positions, the Commission has proposed a 2.3% target for the Czech Republic. Last year, the country spent around 1.54% of GDP on R&D, according to the OECD. Yet the government believes it can do even more and has set itself the more ambitious goal of 2.7%.

The government is now discussing how to divide this national target among various sectors – public, private (businesses) and EU structural funds. Spokesperson Bouška declined to provide any details, citing the confidential nature of the document.

However, he did say that a systematic, incremental increase in public spending is not unrealistic and that private companies have also pledged to co-finance R&D investment.

''For them, it's a matter of prestige,'' said Bouška, cautioning that the pledge is conditional on government support for more R&D investment.

Too rosy a picture?

Although officials have painted a rosy picture and the government last year listed investment in R&D as one of its biggest priorities, tightened budgets due to the economic crisis prevented it from increasing spending. Moreover, the outlook for further increases looks gloomy for the coming years. But much will depend on the new government.

So far, all the centre-right parties that are potentially on the way to forming a new government – the Civic Democratic Party (ODS), Tradition Responsibility Prosperity 09 (TOP 09) and Public Affairs (VV) – have cited higher investment in R&D among their priorities.

Yet it remains to be seen how serious their pre-election rhetoric was and what measures can realistically be taken given that their main task will be slashing the budget deficit.

Businesses expect incentives

Czech business figures see building a knowledge economy based on strong investment in R&D as essential. ''It is a long term priority for the Confederation of Industry of the Czech Republic,'' said Milan Mostýn, a spokesperson for the industry body.

However, he also said that investment in R&D is not expected to increase for some time. A survey carried out by the Confederation of Industry among its members showed that out of 1,600 businesses, almost 60% cut their R&D budgets due to the crisis, while only a quarter decided to invest more.

With the longer term in mind, the confederation asked the government to prepare a new national R&D strategy, together with business organisations, that will identify a number of research areas to be prioritised. ''Also, one of the options [on how to raise private investment] would be the implementation of tax breaks for companies that decide to invest in R&D,'' Mostýn said.

Absorption capacity questioned

Yet other business organisations warn that money is not everything. Referring to a document prepared by business and industry association Eurochambres, the Czech Chamber of Commerce warns that spending on R&D itself ''will not contribute to growth'' and that ''R&D must respond to the needs of businesses, which in turn require far closer links between business and the research community''.

Zden?k Ku?era and Michal Pazour, researchers at the Technology Centre of the Czech Academy of Sciences, agree that it is not just a question of money. Talking to EURACTIV.cz, they said that from a factual standpoint, ''it is very problematic to create any kind of goal as it ignores efficiency of investment, absorption capacity of research and business, structure of the economy, etc.''

The goal should not only reflect the wishes of politicians, but also the economic circumstances for both the efficiency and the absorption capacity of the investments, they added.

With this in mind and given the economic level of the country in terms of GDP per capita, the Czech Republic is not performing badly in comparison to other European countries, Ku?era and Pazour argued. Although it ranks in the group of less developed countries – with 1.54% investment in R&D – the Czech Republic invests more than any other country in this group, they stated.

More private money needed

The scientists said the country could do much better in terms of private R&D investment. With private sources making up just 0.52% of total R&D expenditure, the Czech Republic is far below the EU average.

Yet the level of public spending on R&D is relatively high, meaning that ''public money has not leveraged private investment so far,'' the researchers admit. They said that much more attention should be given to the usefulness and efficiency of public investment.

What can be done to achieve this? There could be programmes to support cooperation between private companies, as well as tax breaks, innovation vouchers and boosting the absorption capacity of businesses, for example via horizontal mobility or consulting service programmes, Ku?era and Pazour concluded.

Raising investment in R&D to 3% of the EU’s GDP is one of the five priorities of a draft ten-year economic plan unveiled by the European Commission in March, called 'Europe 2020' (EURACTIV 03/03/10).

General lines of this plan, the specific 3% EU target and the idea of national targets were agreed by the 27 heads of state and government at the Spring European Council. The June Council will endorse the detailed draft of the integrated policy guidelines.

The strategy defines five headline targets at EU level, which member states will be asked to translate into national goals reflecting their differing starting points:

  • Raising the employment rate of the population aged 20-64 from the current 69% to 75%.
  • Raising the investment in R&D to 3% of the EU's GDP.
  • Meeting the EU's '20/20/20' objectives on greenhouse gas emission reduction and renewable energies.
  • Reducing the share of early school leavers from the current 15% to under 10% and making sure that at least 40% of youngsters have a degree or diploma.
  • Reducing the number of Europeans living below the poverty line by 25%, lifting 20 million out of poverty from the current 80 million.

In a series of articles, the EURACTIV network will present the state of play in individual EU countries on each of the targets. This series looks at how member states react to the 3% R&D target.

The EURACTIV network already found that Eastern EU countries have either rejected or dismissed as irrelevant the planned EU target to reduce poverty (EURACTIV 06/05/10).

  • 17-18 June 2010: EU summit to adopt further details of 2020 strategy, including country-specific targets.
  • Autumn 2010: Member states to submit stability and convergence programmes, as well as national reform programmes.

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