News archive - INNO-Policy TrendChart 'mini country reports': Western Balkan countries

INNO-Policy TrendChart produced 'mini country reports' for each of the 48 countries monitored by the network of country correspondents in the second half of 2011, among them for Albania, Bosnia and Herzegovina, Croatia, FYR of Macedonia, Montenegro and Serbia.

The mini country reports had the objective to furnish three analytical reports with country specific information: a trend report on innovation policy in the EU, an overview report on innovation funding in the EU and an analytical thematic report on demand-side innovation policies. Executive summaries for the Western Balkan countries are provided below. 

Executive Summaries: WBC

Albania

The European Union (EU), which Albania aspires to join, has set clear objectives related to research and innovation as part of the “Europe 2020 Strategy” that seeks to make the EU the most competitive economy in the world. Albania has made significant progress in transition reforms in recent years, but important challenges remain. The government has actively promoted pro-business and -investment policies, which have led to a sharp increase in foreign direct investment (FDI) since 2006 (increasing from €258m in 2006 to €705m in 2009). As measured by the World Bank Doing Business indicators, Albania moved from rank 136 in 2007 to 82 in 2010 and
achieved the second-highest rank among the top 10 reformers worldwide in 2009.
However, the technological level of FDI remains relatively low, constrained by lack of availability of adequately skilled workers and low levels of productivity. Albanian private companies have tended to buy innovations on the market rather than investing in internal R&D, and there is minimal cooperation between public research performers and businesses. Albania, like other Western Balkan EU Associated countries, has lagged behind such developments due to the need to focus on laying the foundations for smart growth (through education, legal frameworks, alleviating poverty, etc.). But as Albania seeks to play a more active role in the European economy and European Research Area (ERA), the government has made efforts since the mid-2000s to invest more in creating, diffusing and applying knowledge in order to helpthe country meet its long-term development goals. The reform of the research system since 2006 and the adoption of the National Strategy of Science, Technology and Innovation (NSSTI) 2009-2015 in July 2009 introduced major changes to improve the effectiveness of the country’s innovation system. Important steps were made in terms of establishing institutions and developing a strategy for a national innovation system, though it still needs to be better oriented toward real societal needs and increased research funding is needed to move the country from the 2009 estimated level of gross expenditure on research and development (GERD) of 0.2% of GDP closer to the EU average GERD of 1.9% of GDP and to raise  competitiveness of the economy.
While seeking to increase public spending on R&D to 0.6% of GDP by 2015, the NSSTI also promotes innovation in businesses and seeks to bring together academic institutions with the private sector under the National Technology Programme. The NSSTI seeks to increase innovation in 100 medium and large private companies either through investment in own R&D or in partnership with academic research institutions or foreign partners. New structures (ARTI, NAIS, etc.), which may cooperate with the private sector in research and innovation initiatives, were set up to implement the NSSTI and the country’s Digital Albania initiative. The Albanian Government has focused on ICT as a main driver of economic, political and social development in the country, evolving from a low-tech, inwardly looking state to a potential regional leader in e-Government, and connectivity, particularly as major infrastructural investments are being made. Now that a high level of digitalisation has been reached, particularly in the national level public administration and in the availability of online public services for businesses and citizens, the focus is shifting to infrastructure and services for society as a whole (broadband infrastructure, 3G technologies, digital TV) and the connectivity of the local government level. The private sector is also being encouraged by the Government to offer digital services to customers, for example Internet- and mobile-banking services. ICT is not only a national priority with its own National Research Programme, but also represents the sector with a large potential for private sector innovation as digital products are adapted to or designed for the specific needs of the Albanian market. On the business front, the Strategic Programme for Innovation and Technology Development for SMEs 2011-2016 approved in February 2011 and its Action Plan, the Business Innovation and Technology Strategy (BITS), represent the main policy measures of the Ministry for Economy, Trade and Energy (METE) for promoting Innovation and technology dissemination in Albanian SMEs. The Business Relay and Innovation Centre (BRIC) will be the executive arm of METE for the implementation of the strategy and will provide both technical assistance and financial support for companies to engage in innovation. It remains to be seen how effective these policies and structures will be in increasing private investment in R&D and the overall innovation capacity of the business community. Furthermore, transparency, competitiveness, management capacity and the ability to monitor and evaluate progress made, including standardised statistics on the R&D and innovation system of Albania, need to be improved. Also, so far the tax code does not foresee any fiscal incentives for companies also that investment in R&D or innovation.

Bosnia and Herzegovina

The post-war economic growth of Bosnia and Herzegovina (BIH) was based on domestic demand, stimulated by foreign investment, raw materials and relatively cheap labour. With the onset of the worldwide financial crisis in 2008-2009, foreign investment reduced considerably thus augmenting the problem of the country’s low economic competitiveness. The issue of the future sources of economic growth is one of the most important matters for the country to address. Future economic growth requires an increased efficiency or productivity, as well as a larger share of domestic know-how in export products and services. The period between 1997 and 2007 witnessed an important level of industrial restructuring in terms of reconstruction and modernisation of the pre-war industrial base, based on wood-processing, metal-working, textile and motor-car industries. This process needs to continue, although this is not yet possible as there is no national innovation system in place. Improvements in quality, adaptation of foreign technologies to national conditions, as well as continued product and process innovations will not be possible without innovative companies, an educated labour force and a more complex research and development (R&D) system. BIH will be unable to achieve long-term growth on the basis of cheap and unskilled labour; rather it has to increase the share of professional labour, quality and national innovativeness, as well as a quality adaptation to and use of foreign technologies and software. This shift will not be possible only at enterprise level without reforming the higher education and vocational education and training systems or without support to companies to increase innovation activities. The BIH R&D system has almost fully disappeared, which is a consequence of the past war. It needs to be re-built, not only at universities and institutes, but also in the business enterprise sector in the first place.
The R&D function in the environment of a very low income per capita in BIH of $7,782 (the IMF data for 2010) is not only the creation of one’s own know-how, but also a far more efficient absorption and diffusion of new technologies. This means that R&D and the innovation system of BIH cannot be a sheer imitation of the system of developed countries; rather, they have to be oriented much more to mastering, adapting to and applying successfully the old know-how and technologies. It is necessary to strengthen national research and development capabilities, as well as the role of universities and institutes in technology transfer. Catching-up with developed countries is not the issue of imitation, but the issue of adaptation and innovation, which requires increased investments in R&D as well the creation of preconditions for innovations in the business enterprise sector. In this context, not only does science in BIH need to contribute to scientific development but also to increased educational attainment, successful use of new instruments or tools and technologies, and to enterprise start-up and expansion.
This shift or the building of a national science, technology and innovation system integrated into the EU cannot take place overnight. It requires a social consensus and full stakeholder agreement, as well as much better knowledge of national restrictions and abilities and also a better knowledge of BiH’s position in the international environment.

Croatia

Despite the expiration of the Science and Technology Policy 2006 – 2010, no new strategic documents have been developed to replace it. The major characteristics and measures related to innovation policy continue, but, in the context of economic crisis, the policy debate related to innovation has been scarce. The changes to innovation policy, which have been implemented, have not affected its overall orientation in a major way – they mostly complemented the existing measures and structures. No comprehensive evaluations have been performed. There have been no significant changes in the responsibilities of governmental bodies that define and implement innovation policy. The main innovation policy challenges include access to capital, increasing business R&D expenditures as a means to enhance accessibility of knowledge, and facilitation of protection of intellectual property.
The main innovation policy opportunities include utilisation of pre-accession assistance and Community Programmes in order to build up competencies and prepare for the utilisation of structural funds. The reform of academic institutions and enhanced networking can create more opportunities for science-industry collaboration, technology transfer and innovation development. In the period June 2009 – June 2011, the only major change has occurred due to the economic crisis, which led to significant budget reductions. There were no new policy priorities introduced. It is expected that continuation of the Science and Technology project, supported by the World Bank, will play a major role in bridging the current financial gaps and preparation of project pipeline for structural funds. In the current policy mix both direct (grants) and indirect (e.g. tax incentives) innovation policy measures are in place. The main types of measures include financial support (e.g. grants for pre-commercial research and innovation commercialisation) and actions to improve the functioning of institutions which affect innovation processes and performance (e.g. intellectual property rights, financial markets, including venture capital, setting up firms, regulatory reforms etc.), with some resources devoted to funding of innovation infrastructure and intermediary institutions. Demand-side innovation policies have not been implemented. Innovation governance in Croatia is insufficiently developed. Policy coordination needs to be improved as well. In order to reform the science and higher education sector the MSES has proposed and released into the public debate on 12 October 2010 three important laws: the Law on Science, the Law on Universities and the Law on Higher Education. The laws should replace the current 2003 Science and Higher Education Bill, which is seen widely as needing improvement. The proposed laws entail significant changes in the functioning of the entire higher education and scientific system and have encountered opposition from a significant part of the academic community, student body and civil society organisations. They have not been adopted. Further policy debate is expected and reform of the sector will be left to the new government (which will be formed in December 2011).

FYR of Macedonia

The main policies that affect the innovation aspects in the former Yugoslav Republic of Macedonia have been adopted since 2008. However, the country does not have a separate innovation policy, which is reflected by a low performance of the Macedonian innovation system. The main innovation priorities are spelled out in the Industry Policy of the Republic of Macedonia for 2009-2020, and the majority of the innovation measures that the country is implementing constitute the implementation of these priorities. The main priorities are collaborative approaches for enhancing competitiveness (business research, government collaboration, networks and clusters, alliances), SME development and entrepreneurship, human resource development and knowledge creation, internationalisation, commercialisation of new products, investment enhancement and intellectual and industrial property rights. The Ministry of Economy through cooperation with the Macedonian Academy of Sciences and Arts, universities and the business sector currently prepares the National Innovation Strategy for the period 2012-2020. The strategy is expected to be released in first half of 2012. The development of this strategy will cover the challenge of missing a clear vision, strategy and policy for developing a National Innovation System. The strategy will also include the policy-level recommendations emerged from the European Innovation Scoreboard, which included the former Yugoslav Republic of Macedonia for the first time in 2010. The main mechanisms for financial support of innovation activities are co-financing and grants provided by the Government and its institutions. However, the available funds are relatively small and the innovation programmes have limited impact on the innovation performance. The new measure introduced in 2010, Equipping Laboratories for Scientific Research and Applicative Activities (ELSR), with a €4.3m budget for 2010 seems to be an exception. This budget significantly increased the total innovation budget for 2010.
Several international organisations through different programmes and instruments support and foster the innovation and development activities in the former Yugoslav Republic of Macedonia. The most important international programmes for the country are FP7, CIP, EUREKA, USAID programmes, projects fully financed by GTZ, such as the Technology Transfer Project for economic integration of the country in the regional and EU markets, etc.
The majority of the measures are not sector specific. However, textile companies, educational institutions, and innovative ICT companies are targeted with specific measures which encompass around 75% of the total budget for 2010 regarding measures that support innovation policy in the country. The measure ELSR which had the largest budget in 2010 (61% of the total budget for all measures that support innovation policy in the country) was focused on the HEI.

Montenegro

After gaining independence in May 2006 Montenegro is still in the process of establishing research and innovation policy and structures. The legal and institutional frameworks for stimulating innovation are yet to be established. To date, three strategic documents have been adopted, reflecting the future national strategy for innovation: the Strategy for Scientific Research Activities 2008-2016 (including an action plan); Strategy for Development of SMEs 2011-2015; and the Strategy for Promotion of Competitiveness at the Micro Level 2011-2015. The policy mix for promoting private investment in R&D has yet to be developed. The main source of research and innovation funding is the government. On the whole, the business sector undertakes limited R&D and enjoys limited support from government. SMEs mostly finance operations from own sources, rather than restrictive and costly bank loans. With continuing economic recovery and growth, it is expected that the business enterprise sector will contribute more to research and innovation. In such an innovation policy vacuum, there is no specific support measure targeting innovation. Instead, there is, within the 2010 Ministry of Science measure for cofinancing scientific research activities, a call “Support to inventors and innovative solutions” that supports individuals and companies who have registered a patent or developed innovative products, services and processes. The planned funding for this call in 2011 amounts to €15,0002. From 2012 the Ministry of Science and Ministry for Information Society and Telecommunications will provide a total budget of €600,0003 during the period 2012-2014 for technology related projects. The Ministry of Economy is expected to launch an innovation policy related measure in 2013.
The higher education sector is largely government funded. The Montenegrin Academy of Sciences and Arts is the most significant public research and scientific institution in the country, covering natural sciences, humanities and the arts. There are three scientific institutes: Institute of History, Institute of Marine Biology and Institute for Foreign Languages. The State University of Montenegro, comprises of 19 faculties and three research institutes, and has about 10,600 students4. The privately-owned University Mediterranean also engages in research through its independent faculties for scientific research. The University of Donja Gorica (UDG), accredited in April 2010, is the second private higher education institution.
Innovative enterprises and start-ups receive support from the European Information and Innovation Centre Montenegro (EIICM), two business incubators and a national network of regional and local business centres. Technology centres, science and research parks and specialised agencies for technology transfer have not yet been established.
Montenegro is progressing on the internationalisation of innovation policies through the EU's Competitiveness and Innovation Programme (CIP), becoming a member in March 2008. Moreover, Montenegro participates in “The Regional Competitiveness Initiative for the Western Balkans”, a project financially supported by the European Commission and implemented by the Organisation for Economic Co-operation and Development (OECD). The main project objectives are to support competitiveness in the region and strengthen capacity building of public administrations by pilot projects in order to foster innovation in the private sector and eliminate skills gaps. There is no demand-side innovation policy in Montenegro.

Serbia

According to the Innovation Union Scoreboard 2010 (IUS2010), Serbia is one of the modest innovators with a below average performance. Relative strengths are in human resources, open, excellent and attractive research systems and outputs. Relative weaknesses are in intellectual assets and innovators. There is still no national innovation strategy, but the recently adopted “Strategy of Scientific and Technological Development of the Republic of Serbia 2010-2015” has mentioned the development of a national innovation system as a key priority for the development of a knowledge economy. Another key challenge for innovation policy is the question of how to increase R&D and innovation activities in the business enterprise sector.
Until 2011 there were three main public funding sources supporting R&D and innovation activities, namely: (i) the Ministry of Education and Science (MES), (ii) the Ministry of Economy and Regional Development (MoERD), and (iii) the National Agency for the Regional Development (NARD). A new funding source for innovation activities is the recently established Innovation Fund. The total budget in 2010 for all categories of research and innovation measures amounted to €107.5m, with the vast majority of funds allocated to research and technologies. The situation in 2011 has improved slightly with a planned budget of €109m, the increase due to the Innovation Fund with funds provided under the EU funded IPA programme. Grants are the only form of support and the only innovation measure with a sectoral focus is the Innovation Fund grant scheme. Both the MoERD and NARD have grant schemes, which to some extent embrace demand-side innovation policy tools such as pre-commercial public procurement and standardisation. Otherwise, there are no national guidelines issued in any fields of demand-side innovation policy.

Source: INNO-Policy TrendChart

 

Geographical focus
  • WBC

Entry created by Ines Marinkovic on March 12, 2012
Modified on March 11, 2012