Sofia, 21 June 2010 Athanasios Sofos Directorate General “Regional Policy” European Commission

1. Competitiveness through Research & Innovation (World Bank)“Europe 2020” and the Role of the EU Structural Funds Sofia, 21 June 2010 Athanasios Sofos Directorate General “Regional Policy” European Commission

2. Content • EU Cohesion / Regional Policy: Purpose, objectives, budget, funds, interventions • Implementation of Structural and Cohesion Funds in Bulgaria today (challenges) • « Europe 2020 » • Future possibilities

3. EU Cohesion / Regional Policy - Purpose • The EU is one of the world’s most prosperous economic zones BUT: • Huge disparities exist among the 271 EU regions – weakens the EU’s dynamism HENCE: • The political goal of reducing the gaps in development

4. <50 50 - 75 75 - 90 90 - 100 100 - 125 ³ 125 EU Cohesion / Regional Policy - Purpose Differences in development in the EU-27 GDP per head as a % of the community average

5. EU Cohesion / Regional Policy - Purpose EU-27 GDP per capita in PPS in 2006Source: Eurostat structural indicatorsEU 27= 100

6. The EU Budget 2007-2013 1/3 of the budget (“1B”) aims at “Cohesion/Regional Policy” (=Structural & Cohesion Funds):€347 billion over 7 years

7. Adaptability of workers and firms Social inclusion Capacity building Technical assistance Cohesion/Regional Policy: Structural & Cohesion Fundsby sector 2007-13 European Regional Development Fund (ERDF) and Cohesion Fund (CF) - €271 billion European Social Fund (ESF) - €76 billion Environment Transport Employment Research / Innovation Human capital Information society Tourism Social infrastructure Culture Energy Institutional capacity

8. Structural Funds 2007-13:R&D + Innovation in the EU regions,

9. 7th FP, CIP and Structural Funds: Complementarity Total EU funding for research and innovation (annual average funding)

10. Bulgaria: General challenges - selection • Lack of management culture and clear allocation of responsibility: • Slow absorption of funding across the sectors • Low administrative capacity • Redundant reporting and control • Complicated or unclear rules and procedures • Slow or late payments to projects • Project pipeline • Regularity issues (corruptive environment, weak judiciary, conflict of interest concept not always understood, procurement high risk) • New financial perspectives (EU budget review) • Budget deficit

11. Bulgaria: Business/Innovation/R&D challenges - selection • Lack of forward-thinking and a well targeted strategy. • Weak co-operation and co-ordination between institutions. (eg. Too many universities/research institutes weaken cooperation ties). • Very slow implementation of measures in programmes. • No or limited regional/local approach to innovation. • Difficulties to secure funding for innovation. • Slow process for attribution of patents. • Knowledge transfer – benchmarking: Learn from others and apply in your region/locally (German Länder example). • More effort needed to promote co-operation between private sector and research institutions.

12. Europe 2020: successor to the Lisbon Strategy RESULTS: EMPLOYMENT: 66% in 2008 (compared to 62% in 2000) R&D (1.9% in 2008 from 1.82% in 2000) • KEY TARGETS • 70 % of the population aged 20-64 should be employed • 3% of the EU's GDP should be invested in Research & Development

13. The crisis has wiped out recent progress: GDP growth:- 4% in 2009, worst since the 1930s Industrial production:- 20% with the crisis, back to the 1990s Unemployment levels: 23 million people 7 million more unemployed in 20 months expected to reach 10.3% in 2010 (back to 1990s level) youth unemployment over 21% Europe 2020: emerging from the crisis

14. Europe 2020: challenges ahead • Europe’s structural weaknesses have been exposed:lower growth potential, productivity gap, high and rising unemployment, ageing poverty, limited fiscal room • Global challenges intensify: competition from developed and emerging economies, global finance, climate change and pressure on resources

15. « Communication » from the European Commission: «Europe 2020 : A strategy for smart, sustainable and inclusive growth” COM(2010) 2020, of 3 March 2010 3 thematic priorities 5 EU headline targets – translated into national ones 7 flagship initiatives – from the Commission + 10 integratedguidelines for implementingreforms in Member States Europe 2020: the EU new strategy for jobs and growth

16. 1.) Smart growth: developing an economy based on knowledge and innovation 2.) Sustainable growth: promoting a more efficient, greener and more competitive economy 3.) Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion Europe 2020: 3 thematic interlinked priorities 16

17. 75 % employment rate (% of population aged 20-64 years) 3% investment in R&D (% of EU’s GDP) “20/20/20” climate/energy targets met (incl. 30% emissions reduction if conditions are right) < 10% early school leavers & min. 40% hold tertiary degree 20 million less people should be at risk of poverty BUT NO “ONE SIZE FITS ALL” Europe 2020: 5 EU headline targets (into national targets and trajectories by 2020

18. Europe 2020: 7 flagship initiatives underpin the targets

19. Europe 2020: 10 integrated guidelines

20. Approaches to the regional /sub-national innovation issues • Innovation Union Communication: • Transversal importance of regions & structural funds • Focus on preparing new programme generation (post 2013) with more trans-national openness and higher share for innovation & research • Aligning structural funds more to Europe 2020 priorities • Joint Communication 'Regional Policy contributing to smart growth in Europe 2020': • Improving impact on innovation under current financial period and regulations • Prepare MS & regions for future programmes

21. “Innovation Union”:Main areas of action with regional dimension • Strategic and integrated approach to R&D and innovation by Member States and their regions • Streamlining and simplification of EU innovation-related programmes • State Aid framework • Public procurement as innovation driver • European Innovation Partnerships • Modernisation of universities, research training and careers • Launch of priority research infrastructures • Benchmarks for research and innovation systems

22. What is “Smart specialisation”? best way to exploit territorial potential through innovation fosterinterregional comparative advantage = evidence-based (SWOT): all assets = no top-down decision, but stakeholder discovery process = global perspective on potential competitive advantage & potential for cooperation = source-in knowledge, & technologies etc. rather than re-inventing the wheel = priority setting in times of scarce resources (not "coffee for all") = getting better / excel with something specific = accumulation of critical mass = not necessarily focus on a single sector, but cross-fertilisations

23. Future Structural Funds (SF): Ongoing discussion • Input from Evaluation of 2000-2010 period. • Which relationship with Europe 2020? • SF designed on geographic/territorial or sectoral basis? What mix? • “Place-based” approach (“Barca report”), “regional” innovation,……. • “Smart Specialisation”. • Role of “macro-regions” (Baltic, Danube….) • Which sectorsfor which regions? • Infrastructure? (transport, environment, “green” energy) • Innovation and R&D? • Climate change, poverty, demographic changes, …… • C

24. Future Structural Funds (SF): Ongoing discussion-II • What implementation and control systems? • Need for efficiency and sound management of funds. • One system fits all? Case by case (EU27+) • Regional vs. national? • Subsidiarity (at EU, national, local level) • What budget? • EU Financial Perspectives 2014+ to be launched in 2011.

25. Future Structural Funds (SF): Ongoing discussion III • What does Bulgaria (and its regions and territories) want ? • Identify needs in a pragmatic way • Establish your priorities • Draft your proposals • Make your alliances (with other Member States) • Set up task forces and negotiation teams of high skills • Be ready for the Council negotiations!

26. Thank You ! e-mail: athanasios.sofos@ec.europa.eu Useful web sites: http://europa.eu/index_en.htm http://europa.eu/pol/index_en.htm http://ec.europa.eu/regional_policy/index_en.htm http://europa.eu/policies-activities/funding-grants/index_en.htm http://cordis.europa.eu/eu-funding-guide/home_en.html

27. SLIDES TO DISCUSS ONLY IF TIME ALLOWS

28. From Idea to Market Knowledge foundation Breakthrough ideas Access to finance Innovation market Scope of Innovation Union European Innovation Partnerships • Principles for • Member State policies • International cooperation • Governance

29. From Idea to Market Knowledge foundation Breakthrough ideas Access to finance Innovation market

30. Knowledge foundation • Issues • Insufficient supply & quality of research & innovation skills • Limited reforms in universities • Barriers to cross border flow of people, funding • Limited investment in strategic infrastructures • Areas of action • ERA framework to remove obstacles to cross border flow of people and funding • Modernisation of universities, research training and careers • Launch of priority research infrastructures

31. Breakthrough ideas • Issues • Underinvestment in knowledge • Complex funding landscape • Costly EU patent system and unused patents • Little recognition of EU design strengths • Areas of action • Streamlining and simplification of EU programmes • EU patent • EU knowledge markets (DK and FR examples) • Recognition of excellence in design

32. Access to finance • Issues • Lack of finance is main constraint on innovative companies • Few European SMEs grow into major companies • Specific market gaps for start ups, high growth companies, major research and innovation projects • Current EU instruments (RSFF, CIP Financial Instruments) under funded. • Areas of action • Cohesion Funds for R&I and smart specialisation • EU financial instruments to address market gaps, notably through EIB/EIF • State Aid framework

33. A Single Innovation Market • Issues • Lack of harmonised regulations for innovations (e.g. type approvals of green vehicles) • EU standard setting too slow • Public procurers lack incentives, knowledge or scale to benefit from innovation • Areas of action • Regulatory frameworks linked to Partnerships • Review of EU standardisation system • Procurement for innovation

34. European innovation partnerships

35. European innovation partnerships • Issues • Major societal challenges • Many actions, uncoordinated • - R&D programmes / demand-side actions • - EU / national / regional (and global) • To address these issues,European Innovation Partnerships will be: • Not a new instrument alongside the others; but • Frameworksbringing together main actors, policies and actions at EU and national levels, from research to market, around common objectives and targets

36. Principles for • National policies • International cooperation • Governance

37. Principles for national policies • Issues • National policies essential for establishing a single market for research and innovation • National research and innovation systems more effective if they share some broad characteristics, recognised as common to well-performing systems • « Integrated guidelines » under Europe 2020 are too general for this purpose. • To address these issues, commonbenchmarks for national research and innovation systems could be developed and agreed with the Member States

38. International cooperation • Issues • Need to attract best talents from abroad. • Need for stronger cooperation, notably on global challenges, but with level playing field on reciprocal access, intellectual property, interoperable standards, lifting trade barriers. • EU and MS weakened by their lack of coordination. • Areas of action • Make the most of visa directive and Blue Card • Establish level playing field • Common EU-national policy orientations for international cooperation amongst major global research infrastructures

39. Implementation and governance • Commitment at all levels • European Council • Overall steering • EU Council • Policy orientations, codecision • Eur. Parliament • Policy orientations, codecision • Member States • Apply benchmarks, specialise smartly • Regional and local authorities • Specialise and develop potential • All actors • From business to citizens

40. Implementation and governance • Commission support • Initiative of proposals • Annual Progress Report (Europe 2020) • with Country Specific Recommendations • Independent peer reviews • of national systems • Technical assistance • for smart specialisation • Use of Structural Funds: programming, implementation, reporting • Innovation Convention on state of Innovation Union (yearly) • Scoreboard on research and innovation

41. RESULTS FROM 20 YEARS INNOVATION IN THE EC APPEARING ON SLIDE BUT NOT PRESENTED IN THE WORKSHOP

42. Conclusions (1): on the conceptual framework • Innovation is not R&D…and just R&D is not Innovation: promoting innovation-led regional development is not primarily about increasing R&D excellence and R&TD infrastructures (supply push) but first and foremost about a change of culture where efficient innovation systems (demand pull) mobilize the intellectual and entrepreneurial capacities to create an innovation friendly business environments, for SMEs in particular, in all regions and in all sectors (not just high-tech) • thus • The linear model (from R&D to the market) is much less relevant for policy design than the systemic or interactive model: not just patents but economic exploitation of talent and new ideas – not just industry and big firms with R&D but also services, competitive research and open innovation • because • Regional innovation capacities are much more about personal engagements, institutions, networks, cooperation (social capital) than it is about narrowly focused science and technology efforts: reinforcing triple helix – knowledge triangle, clusters and university-enterprise is key • Why? • Regional innovation for most regions in the EU is basically about knowledge absorption (education and training, advanced business services) and diffusion (technology transfer, ICT, entrepreneurship) than about knowledge generation (science efforts)

43. Conclusions (2): on policy design • Innovation has a strong territorial dimension (tacit knowledge-networked economy) and there is no “one size fits all” innovation policy: regional diversity is an asset that advocates for different routes to growth through innovation – smart specialization • Regional Innovation Paradox: big need, big money and no capacity • It is no longer about what or why but about how and who? • Opening minds is more difficult than opening roads – need for much strengthen strategic planning capacities of regional/national governments (from design to ongoing learning evaluation) and facilitate a culture of risk taking • R&D excellence and Regional innovation are complementary and we need both: exploiting agglomeration and economies of scale is important (ERA) but also diffusion and absorption mechanisms based on regional potential • Beyond R&D expenditure and patents: we still do not have the required indicators for properly characterizing regional innovation potential or measure policy impact • Matching business demand (as a starting point) with RTD supply is vital Microeconomic competitiveness problems can not be efficiently tackled by overdoses of macroeconomic or sector based policies but by integrated, place-based regional policies

44. Conclusions (3): on the role of the public sector • Public sector should provide leadership and vision, rather than control, and catalyze economic development by promoting new ideas and partnerships with the private sector: not “for them but without them” • Support schemes must be long lasting, understandable and readily accessible by SMEs • Place-based regional innovation strategies and action plans integrating multilevel governance (national-regional) and horizontal (inter-ministerial) cooperation are a necessary first step • Grassroots ownership of innovation strategies are required: consultants are useful but not in the driving seat • Listen to Regional Development Agencies, Technology Centres, Technology Parks and Incubator managers, Technology Transfer Offices…they are soldiers in the front line • Venture capital, business angels, soft loans, guarantees…financial engineering better than grants and tax incentives although need for combination and a wide menu • Public procurement (green and innovation driven) is an important tool to consider • Innovation policies require risk taking, trial and error and sound evaluation on top of deep pockets and long lead times (political consensus a plus)