1

Science, Technology, and Economic Development in South Eastern Europe

Milica Uvalic, University of Perugia

UNESCO-ROSTE Workshop

Stockholm, Aug. 26, 2004

2

Assessment of the state of S&T in SEE

• Which SEE countries? Albania, B&H, Croatia, FYR Macedonia, S&M (“western Balkans”, or the SEE-5)

• State of S&T: determined by the general economic/political situation in SEE Cs

• Current economic situation - poses major constraints on national policies in S&T

3

Specific circumstances

• Extreme political instability since 1991 (break up of SFRY, 5 military conflicts, sanctions/isolation, NATO 1999 bombing) --- delays in economic & political reforms, inward-oriented economic strategies

• Positive turnaround since mid-1999-2000, but events of the 1990s left very deep traces

4

In EU: transition to a knowledge-based economy

• S&T perceived as a key resource for competitiveness and long-term growth

• Lisbon and Barcelona European Councils: commitment to invest 3% of GDP in R&D by 2010; innovation and information technologies; European Research/HE Areas

• Highly relevant for the SEE Cs aspiring to become EU members (Croatia a candidate)

5

Key issues

• Economic constraints for S&T in SEE• Some main features (in SEE)

– National policies in S&T– Investment in R&D– Human resources in R&D– Impact of S&T on competitiveness and

employment

• International/regional/bilateral cooperation

6

Economic constraints for S&T in SEE

• Still today: rather unfavourable economic situation (+ unresolved political issues)

• Macroeconomic stability achieved (low inflation), but development and other economic indicators reveal serious longer-term structural problems

7

Economic features...

• GDP in S&M, B&H: in 2002 50% of 1989 level; only Albania surpassed it by 20%

• GDP/capita: 10-30% of EU average, wide differences (Croatia over $6,000, 3x higher)

• Industrial production even sharper fall (in B&H to 28%, in S&M to 38% of 1989 level) - dramatic consequences

8

Economic features...

• Economic structure: backward trend! Process of de-industrialisation (return to agriculture)

• Very high unemployment, even 30-40% in Mac, B&H, S&M

• Increasing public debt, public deficit still 4-8% of GDP, further cuts necessary

• Very low national savings and investment

9

Economic features...

• External deficits, low competitiveness on EU markets, non-diversified exports, high dependence on imported technology

• Dependence on foreign resources to cover CA deficits (problem of “aid-addiction”)

• Very limited inflows of FDI into SEE-5 (1989-2002): $ 10.6 billion (6.1% of total FDI in 27 transition Cs), 60% in Croatia

10

National policies in S&T

• Starting conditions different• Former Yug more favourable (institutions,

human capital): e.g. Universities (Zagreb 1669, Belgrade 1889), education system, openness (intern. cooperation, scientific exchange, travel abroad)

• Albania: traditional model, most closed economy, first University set up in 1957

11

National policies in S&T...

• Reforms in course in all Cs (variable speed)• New laws (HE, Science & Research, etc.),

government documents, national strategies, new institutions (Agencies), BUT...

• Delays in implementing laws, only on paper• S&T in the shadow of other priorities, lack of

understanding of importance of science, absence of a clear longer-term strategy

12

National policies in S&T...

• Higher Education reforms - different paths: Croatia too centralised (state), B&H too decentralised (no single Ministries)

• New laws on HE: declarative autonomy, all Cs signatories of Bologna Declaration, Croatia introduced 3+2, others to follow...

• New private universities, but lack of proper accreditation and quality assurance

13

National policies in S&T...

• Limited possibilities to modernise scientific infrastructure (purchase new equipment, modernise laboratories, libraries, information systems), due to poor financial situation of R&D institutions

• Inappropriate treatment of R&D: a serious obstacle for more intensive research

14

Investment in R&D

• R&D poorly funded (budgetary cuts), R&D investment lower than the EU-15 average

• Govern. budget prevalent source of finance• Private funding limited - delays in privatisation

(private sector 45% GDP in S&M, 50% in B&H), no links with univer.

• Donors aid crucial, but often short-term, no interest to invest in certain key areas (labs)

15

Investment in R&D...

• In Croatia (1995-2000): Ministry for S&T got only 1.1-1.3% of GDP, of which– 31-26% for R&D, but a large part for staff salaries,

only 17-20% for research projects– 57-65% for higher education– 10% Croatian Academy of Arts and Sciences

• Still, Croatia’s investment in R&D higher than of some EU acceding Cs (Hung, Eston)

16

Investment in R&D...

• In Serbia, R&D spending much lower: 0.32% of GDP in 2003, though rising - plans to increase public spending to 1% of GDP by 2005 and further to 1.4% by 2010

• In Macedonia: only 0.025% of GDP in the 2001 budget for the 375 projects funded by the Ministry of Education and Science

• B&H: no reliable statistics, only estimates

17

Human resources

• Dramatic effects of SFRY break-up, wars, economic crises, financial cuts: – massive&continued brain drain (best experts)– brain “waste” - leaving S&T professions for more

profitable jobs (private or informal sector)

• No. of researchers and scientists declining, though trends differ - in Croatia R&D personnel reduced slower than total employ

18

Human resources...

• S&T professions unattractive: low pay, no social status, no incentives

• Recent social changes (rising inequality, social differentiation, “new rich” class) - disruption of the system of values

• Education no longer a guarantee to get a job• Limited employment prospects for S&T

professions - decreasing graduates

19

Human resources...

• Brain drain - Tirana University lost 40% of its academic staff over the last 10 years, of which 90% are under 40 years old

• Dramatic proportions of brain-drain from all other Cs (BiH, Mac, Serbia, estimates vary), departure of best experts, deficit of researchers of middle age generation

• Some recent improvements in Cs worse off

20

Human Development Index (UN)(GDP/cap, education, life-expect)

Trends in HDI in Serbia

Data for 1996 refers to FRY

HDI trend

0.768

0.762

0.725

0.775

0.700

0.710

0.720

0.730

0.740

0.750

0.760

0.770

0.780

1996 2000 2001 2002

21

R&D impact on competitiveness and employment?

• Limited, but potential exists - highly under-utilised human capital (unemployment!)

• More public support for R&D (particularly in SMEs) and of knowledge industries

• More active labour market policies (better matching of demand & supply of skills, lifelong learning, retraining courses)

22

Competitiveness and employment

• FDI limited (key channel for transfer of knowledge and modern technology)

• Unfavourable situation regarding trade in high tech products - all SEE Cs highly dependent on imports of high-tech products, export very few high-tech products (pharmaceutics, armaments)

23

Competitiveness and employment...

• European Charter for SMEs in WB (2004): Surveys of firms attitudes - Findings?

• Education and training, and technological capacity - not attributed high priority by business community in SEE Cs, yet...

• Informal market of training/education, networks of regional business centres

24

Competitiveness and employment...

• Many local initiatives to raise public awareness about entrepreneurship

• Training courses for managers, courses on entrepreneurship (in Mac from age of 7)

• TV programmes - notions of good practices• Fairs, exhibitions, debates, even national

competitions to select the best entrepreneurs (Croatia, Montenegro)

25

Competitiveness and employment...

• Fostering technology-sharing through inter-firm clusters: experience gained in Serbia, Macedonia, recent tender in Croatia

• Technology parks: Croatia and Macedonia each have 4, Serbia has feasib. studies for 3 parks, Maced in Bitola, plans for B&H

• EU initiatives to support high-tech start ups replicated in SEE? To be explored...

26

International, regional, bilateral cooperation in S&T

• SEE-5: Constant renewal of international links in recent years, benefiting also S&T

• EU support of SEE: SA Process, Stability Pact for SEE, CARDS programme, EIB loans, EBRD…+ IFIs + other donors

• Promotion of regional cooperation in SEE: many regional projects in course

• Bilateral agreements: numerous projects

27

International cooperation...

• Results clearly positive also for S&T• Regional networks in education (Graz

process, Ljubljana Network); Inter-Balkan Forum on IST, Balkan Physical Union, etc.

• TEMPUS programme: university exchange• Inclusion of SEE Cs into FP6, gradual

integration into European Research Area• BUT -much more could be done

28

International cooperation...

• Making SEE-5 eligible for other EU programmes reserved for candidates, e.g. EIB’s i2i (Innovation 2000 Initiative)

• Proposal: to set up a special EU regional assistance programme for R&D (technology incubators, start-ups, venture capital)

• Limited funds for longer-term research or researchers mobility (conf participation)

29

Concluding remarks

• Situation in the S&T sector in SEE Cs not very satisfactory, complex tasks ahead

• Prevent an increase in the technological gap EU-SEE through more appropriate policies (domestic and international)

• Raise public awareness about the knowledge-based economy (key role of innovation and technological progress)

30

Concluding...

• Right balance between restrictive economic policies, and other types of policies with long-term effects - raise competitiveness and employment (human capital!!!)

• Attract more FDI by improving business environment and decreasing country risk

• Continued foreign assistance important in the medium term