State Program of Innovative Development: Back to the old track

Andrei Laurukhin

Summary

The first year of the implementation of the State Program of Innovative Development for 2016–2020 was not very encouraging for Belarusian science. It announces a number of ambitious projects designed to upgrade the Belarusian economy and enhance its competitiveness globally. However, it does not provide for any significant changes in terms of implementation, and just repeats the concept, format and structure of previous programs with all their shortcomings. The results of 2016 show that with respect to most scientific and innovative development indicators, alarming trends persist and negative symptoms continue to aggravate.

Trends:
State Program of Innovative Development for 2016–2020: Old wine in a new bottle

According to the assessment by experts of the United Nations Economic Commission for Europe presented in the second Innovation Performance Review of Belarus, the Innovative Development Program launched in 2016 repeats mistakes of the previous science and innovation development policy that does not give grounds for optimistic forecasts. The program eclectically combines ill-connected measures within the framework of an extremely loose political orientation, and does not specify particular budgetary allocations for their implementation. 1 The Innovative Development Program 2016–2020 retains the outdated strategic understanding of innovation as a linear process that extends from the research and development stage to commercialization of research results with the shortest possible time cycle.

Experts reckon the groundless distinction between the so-called ‘scientific and technical projects’ (to be executed as part of government scientific and technical programs) and ‘innovative projects’ among no less glaring contradictions in the Innovative Development Program. The ‘scientific and technical projects’ – the key components of innovative activities – are actually excluded from the scope of the Program. At the same time, it comprises many projects that are on the periphery of innovative activities.

The practical innovation policy baselessly dominates the technological innovation area, while other types of innovations (product, process, organizational and marketing) are completely ignored, and this is a chronic problem.

The legal status of intellectual property rights remains undefined due to the unresolved issue of commercialization of the results of scientific and technological activities. As practice has shown, the legislative norms established by decree No. 59 of February 4, 2013 2 do not allow identifying legitimate owners of intellectual property rights arising from scientific research funded from the national budget. As a result, scientific institutions cannot sell intellectual property rights or engage in their subsequent commercialization.

The Strategy for the Development of Innovative Economic Clusters adopted in 2014 stumbles across the deficit of subjects of the innovation infrastructure, which could take the initiative to implement this strategy. In order to solve this task, the Innovative Development Program once again proposes a ‘good old’ approach, which determines the dominant role of large state-owned enterprises in the industrial sector.

Transformation of the composition of innovation funding

Legislative changes in the funding of the Innovative Development Program reflect and consolidate the long-term trend of transferring the costs associated with innovation to bank loans, which constitute around two-thirds of the total funding (most of Belarusian commercial banks are owned by the state). Own funds of the organizations involved thus make up around 18%. State grants are supposed to be the third source of funding.

The Belarusian Innovation Fund (BIF) plays a key role among all sources of funding. On the basis of legislative changes of the past few years, it is able to finance the innovation process at the final stages (commercialization and market penetration), and to use new tools to render support at the initial stage (grants and vouchers). From 2010 to 2014, the BIF financed 16 to 24 projects a year for a total of 324.8 billion Belarusian rubles, including 114.6 billion in 2012. In 2016–2020, the Innovative Development Program provides for 65 billion in 2016 and 52.7 billion in 2017 with a focus on the production of pharmaceuticals, mechanical engineering products, medical devices, agriculture and devices for scientific research.

However, in 2016, grant applications were few and voucher applications even fewer among other things because the selection process is too complicated and there are not enough personnel adequately qualified to competently and effectively make this selection. To rectify the situation, the Innovative Development Program envisages the creation of a centralized ‘innovation fund’ in 2016, which will be managed by the State Committee for Science and Technology (SCST). It will integrate 25 sectoral and seven regional innovative funds established in 2012. New financing instruments will be mainly disposed by the Belarusian Innovation Fund and the Belarusian Fund for Financial Support for Entrepreneurs.

A new financial institution – the Development Bank of the Republic of Belarus – was created to develop the infrastructure and provide expert support through financing foreign companies and supporting small and medium enterprises. The Development Bank is seen as the only channel for financing projects under all government programs, including innovative ones. There is one difficulty, though: tools to determine the differences between innovative and non-innovative products (and, accordingly, projects) have not been worked out yet. As a result, financial resources provided to small and medium enterprises are sometimes intended for upgrading the existing facilities, rather than producing new commodities or services.

The new centralized innovation fund, which is supposed to select and finance innovative projects of national priority, is meant exactly to resolve this difficulty. It is assumed that the fund will be established and managed by the State Committee for Science and Technology, have its own budget in accordance with the current Innovative Development Program and dispose of financial resources totaling 743.5 billion rubles 3 in 2016–2020. The fund will finance the following four areas:

It yet remains to be seen how this complex, multi-level and highly centralized system will perform the tasks assigned to it.

The past year did not change the situation for the better in terms of net inflow of foreign direct investment (FDI), which has remained at a very low level since 2011 (within US$ 2 billion), while the investing countries are very few: Russia, the United Kingdom, the Netherlands, Cyprus, Austria, Germany and China.

On December 23, the BIF (50% of the capital) and the Russian Venture Company (49% of the capital + 1% of the RVC Infrafund) established the Russian-Belarusian Venture Investment Fund. First investments are to be made in 2017. According to the plan, they will not be limited to the sectoral affiliation of start-ups, but can be made in IT, biotechnologies and pharmaceutics. It is worth noting that only the start-ups, which will work not only inside the country, but also in the markets of the Eurasian Economic Union, are being considered.

Year of Science: Celebration leaving a bad taste

The pompous announcement of the coming year as the Year of Science by a presidential decree 4 contrasts with the actual, truly disastrous situation in this field (which is especially striking when it comes to fundamental science). So, according to the Innovation Union Scoreboard (IUS-2015), from year to year, government spending on R&D (0.2% to 0.3% of GDP annually) is declining, while the internal costs of research and development remain at 0.52% of GDP. 5 The number of organizations performing research and development (more than 20 units in the past year) continues to decrease in all sectors (public, business and higher education).

The reduction in the number of personnel engaged in scientific research and development set a new historical anti-record in the entire recent history of the country. As of the beginning of 2016, the number of personnel fell to 26,153 persons, and the number of researchers fell to 16,953. 6 As before, the reduction in the number of personnel equally affected commercial organizations, the public sector and higher education.

With respect to the various sectors of science, this most profoundly affected engineering sciences (a reduction by 471 researchers in comparison with 2014), agriculturalsciences (74) and humanities (5). Against the background of this reduction, the number of researchers in the field of natural sciences (an increase by 109 researchers), medical (74) and socioeconomic sciences (33) inspires certain ‘quantitative optimism.’

The National Academy of Sciences (NAS) of Belarus has completely turned from an organization carrying out fundamental scientific research into a center of applied science and innovation transfer. At the moment, there are 122 various commercial organizations and more than 72 innovation centers (clusters) in the structure of the NAS for building links between scientists and consumers. As much as 70% of the total budget of the NAS is provided by production capacities and only 30% is allocated from the state budget.

Educational institutions are less successful in the transfer of scientific research to technology, although four out of the seven technoparks are located inside universities. In many respects this stems from the fact that intellectual property rights for all values ​​produced by academic and scientific communities belong not to the host universities, but to the Ministry of Education: the actual legal owners of intellectual property rights have been alienated from the results of their activities and do not have a positive motivation for their subsequent commercialization.

The generalized results of 2016 in Belarus are reflected in the Global Innovation Index of the World Intellectual Property Organization (WIPO, UN) for 2016. In this index, Belarus is in the lower part of the list between Iran and Kenya having dropped 26 positions against 2015 and now ranking 79th among 128 countries. 7

All hope pinned on Belstat

Amid old and new problems in the development of science and innovation, significant progress reached by the National Statistics Committee (Belstat) in 2011–2016 (according to the Second Innovation Performance Review) during the bringing of the national system for the analysis and monitoring of science and innovation into line with international practices and the recommendations of the First Review 8 is encouraging. In particular, the experts point at the adoption of indicators consistent with the EU Innovation Scoreboard and regular innovation surveys at the firm level, and the adoption of international standards to improve conceptual definitions, methodologies and approaches in the study of innovation.

Belstat took as a source the statistics textbooks of the Organization for Economic Cooperation and Development (OECD), Eurostat and the UNESCO Institute for Statistics. As a result of all these changes, it is possible to obtain relevant quantitative and qualitative data on firms’ innovative activities, including the classification by type of expenditure, sources of financing and the impact of innovation on productivity.

A no less important step has been made in the international comparative analysis of data: at present, data are collected and published annually with respect to 16 out of the 25 EU Innovation Union Scoreboard indicators that makes it possible to carry out an adequate comparative assessment of Belarus in relation to other countries. Finally, the methodology of the forms used for statistical reporting by organizations performing research and development has been improved and harmonized with international standards: basic concepts, definitions and institutional classification are based on the OECD’s Frascati Manual.

The country adopted the system of national accounting SNA-2008, UNESCO International Standard Classification for Education 2011, and the OECD Labor Force Statistics of 2007. Since January 1, 2016, national classifications are harmonized with the latest relevant international versions for activities (NACE 2008) and products (CPA-2008).

Conclusion

In 2016, the policy in the field of science and innovation continued to consist of all the old instruments that have proved ineffective in practice in recent years.

The situation with scientific personnel and the future of fundamental science raises particular concern. The new historic anti-record in the reduction in the number of researchers can have irreversible consequences for the entire institution of Belarusian science. Taking into account that fundamental science developed mainly within the walls of the National Academy of Sciences of Belarus, the final transformation of the latter into a center of applied research can ruin fundamental science at large, which will inevitably negatively affect the scientific ethos among scientists, trigger erosion of scientific communities, and considerably narrow the possibility of strategically important research.

At the same time, Belstat’s success in the harmonization of the national system of analysis and monitoring of science and innovation with international standards and practices is encouraging. New statistical data relevant to international standards will make it possible to understand the factors that restrain and impede the development of science and innovations in the country more clearly, realistically and accurately.