Stimulating R&D and Innovation to Address Romania's Economic Crisis: A Bridge Too Far?

Abstract

This paper discusses the effects of the global crisis on the Romanian economy, in general, and the R&D and innovation system, in particular, and the set of anti-crisis measures that the government adopted in the attempt to contain the damage. Notably absent from the anti-crisis package were measures in support of R&D and innovation, a sector that was heavily affected by the crisis and that could have had a significant potential to contribute to the economic recovery, if supported by adequate policies and funding schemes. We argue that, learning from the missed opportunities of the recent years, bold and integrated measures in support of R&D and innovation need to be adopted in the country in the short to medium term, in order to speed up the economic recovery and realize a significant national and regional innovation potential that has been largely underexploited so far. The “creative destruction” (Schumpeter (1942) Capitalism, Socialism and Democracy (New York: Harper)) in the R&D and innovation system triggered by the crisis could thus catalyse an ample process of creative reconstruction and provide an opportunity for renewal and improvement that is too good to miss.

Notes

The entrepreneurial index is determined as a weighted average of three indexes: the business environment index, the SME index and the entrepreneurs' assessment index.

Successful measures included: maintaining the 16% flat tax and the 19% VAT, rebalancing of the RON–euro exchange rate, keeping unemployment within acceptable limits, allocation of 7% of the GDP for investments, acceleration of investments foreseen for Q4 2009 to start in Q3 2009, a five times increase in state aid for SMEs and a 6-month grace period in their tax payments, simplification of procedures for accessing structural funds and increasing of state pre-financing, support for the unemployed and employees hiring disabled people, social protection measures, support to the social housing programme ‘First Home’, etc. (Government of Romania Press Office, 2009a)

For instance, addressing the effects and not the causes of the crisis, presenting measures previously proposed by the opposition as new measures initiated by the government, providing state aid for unprofitable industry sectors, supporting the production of new cars instead of creating better traffic and parking conditions for the existing cars, etc.

The loan, which will be repaid by 2015 at an annual interest rate of 3.5%, made Romania the sixth country in Eastern Europe to borrow money from the IMF after Hungary, Belarus, Ukraine, Latvia and Serbia (Interpress Service, 2009).

Significant losses of researchers, especially in the national R&D institutes (2088 certified researchers and 195 PhDs lost from 2008 to 2009, according to NASR, 2010, p. 4), weakened capacity to attract young researchers and stop the brain-drain abroad or towards better paid domestic sectors, temporary freezing of several components of the National RDI Plan, weakening or dissolution of public–private partnerships, etc.

Belgium, Estonia, Ireland, Italy, Latvia, Lithuania and Romania.

The gap to 27 is due to the lack of data for Greece and a break in series in Spain and Poland in 2009, which prevents a direct comparison of the 2009 R&D budget (government appropriations or outlays on R&D) with 2008 for these two countries (European Commission, 2011b).

 Government R&D expenditure and higher education R&D expenditure.

Romania's Innovation Union Summary Innovation Index rose from 0.195 in 2006 to 0.237 in 2010 at an average annual growth rate of 5.23%. This relatively high growth rate of the Innovation Index places the country among the growth leaders in the ‘Modest Innovators’ group (next to Bulgaria), and also among the overall growth leaders (next to Bulgaria, Estonia, Malta, Portugal and Slovenia).

ReNiTT is the network of technology transfer and innovation institutions that provide various services of technology information, counselling, training and technical assistance to public RDI units and enterprises, especially innovative SMEs. In 2011, ReNITT included 54 accredited entities: 14 technology transfer centres, 20 information technology centres, 16 technology and business incubators and 4 S&T Parks (Tanase, 2011).

For example, University of Bucharest has a Department for Research and Technology Transfer, which ensures the management of all research contracts, while University Babes-Bolyai of Cluj-Napoca has a Department of Research and Programme Management which manages the projects run within national and international programmes, and coordinates technology transfer, patenting and IPR activities, as well as evaluation and statistics operations.

For example, the Ministry of Economy, Trade and Business Environment; Ministry of Public Finances; Ministry of Regional Development and Tourism; Ministry of Agriculture and Rural Development; Ministry of Environment and Forests; Ministry of Communications and Information Society; Ministry of Transport and Infrastructure; Ministry of Labour, Family and Social Protection; Ministry of Health; Ministry of Administration and Home Affairs.

Primarily the Consultative Board for Research, Development and Innovation (CCCDI), National Council for Scientific Research (CNCS) and the National Council for Development and Innovation (CNDI), who ensure the scientific coordination of NASR's Executive Unit for Higher Eduction, Research and Innovation Funding (UEFISCDI).

For example, the 2007–2013 National Development Plan, the Document and Action Plan regarding the 2005–2008 Industrial Policy of Romania, and the 2005–2009 National Export Strategy.

There are also other policy documents including R&D and innovation objectives, next to other socio-economic objectives: (i) the 2011–2013 National Reform Programme, which continues the reforms started in the 2007–2010 National Reform Plan and proposes new reforms in response to the European Commission's Europe 2020 Strategy and other strategic documents; (ii) the National Strategic Reference Framework (NSRF), derived from the National Reform Programme 2007–2010; (iii) the National Roadmap for Research Infrastructures; and (iv) the National Pact for Education and Research, established in March 2008. 

These goals include: (i) development of the national R&D and innovation system capacity to create, transfer and use knowledge; (ii) fostering R&D and innovation activities and services in all socio-economic sectors and increasing their demand for these activities; (iii) supporting the provision of human resources for R&D and innovation activities and services; (iv) improving the innovation framework and the innovative capacity of business firms, especially SMEs; (v) stimulating local and regional technological development and innovation potential, and (vi) stimulating international collaboration.

The Plan was coordinated by the Government General Secretariat, in collaboration with the Ministry of Public Finance, Ministry of Education, Research, Youth and Sports/NASR, Ministry of Agriculture and Rural Development, Romanian Academy, Academy of Agricultural and Forestry Sciences, Ministry of Communications and Information Society.

These were: (i) payment of international organisations’ membership fees (FP7, EURATOM, CERN, etc.); (ii) maintaining the research capacity of national R&D institutes by providing a 30% increase in their institutional funding allocated through the Core R&D programmes; (iii) increasing the absorption of structural funds; and (iv) freezing new calls under the National R&D and innovation programmes.

Increasing R&D and innovation investments, the importance of the area at government level and the coherence of the policy mix, stimulating business R&D and innovation through implementation of some fiscal incentives and financial policies with impact on the private sector, adoption of specific financial measures and of a unitary monitoring and evaluation procedure based on an updated classification of R&D and innovation expenditures and implementation of recommendations of intermediary evaluation of the 2007–2013 National Strategy and RDI Plan.

They are proposed by some national R&D institutes to support their specific medium- and long-term strategies, and are financed by NASR as the only form of institutional funding that is allocated competitively among the institutes.

They are proposed by some national R&D institutes for the technological development of the respective sectors and are financed by the respective line ministries, including MERYS/NASR, Ministry of Economy, Trade and Business Environment, Ministry of Agriculture and Rural Development, Ministry of Environment and Forests, Ministry of Communications and Information Society.

The West Region was the first that developed its 2004–2008 RIS, which was later followed by the 2009–2013 RIS. The other five strategies for the regions Bucharest-Ilfov, North-East, North-West, South-East and South Muntenia were developed during 2005–2008. A follow-up of the 2005–2008 RIS was subsequently developed for 2008–2013 only by South Muntenia.

The regional governance system was initially defined in Law 151/1998 and was later replaced by Law 315/2004, which specifies the regional governance structures, coordination mechanisms, objectives, competences and specific instruments for the regional development policy.

Operation O2.2.1: development of existing R&D infrastructure and creation of new infrastructures (laboratories and research centres) (covers investments in health; agriculture and food safety; energy; environment; innovative materials products and services) and O2.2.3: development of networks of R&D centres, coordinated at the national level and connected to European and international R&D networks (GRID, GEANT).

See http://www.anrmap.ro/indexro.php?page=legislatie_nationala_en for an overview.