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OMC Policy Mix Review Report Country Report Lithuania

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OMC Policy Mix Review Report Country Report Lithuania OMC Policy Mix Review Report Country Report Lithuania June 2007 Reviewers: Mark Beatson Department of Trade and Industry, United Kingdom Stef Smits Ministry of Economic Affairs, Netherlands Dr. Boris Pukl Slovenian Research Agency, Slovenia Jan Windmüller Danish Agency for Science, Technology and Innovation EC observer: Werner Wobbe This report is based on input by all reviewers and prepared by Prof. Jakob Edler, Manchester University, Manchester Institute of Innovation Research as part of the IPTS Specific Contract No. C 150176.XII to support the CREST OMC-3% Policy Mix Peer Reviews. CONTENTS 1 Introduction 1 2 The Lithuanian R&D and Innovation System and Policy Mix 2 3 Commentary by the Review Team 6 3.1 Introduction 6 3.2 The governance of RTDI policy and the policy mix 6 3.3 The Science Base 9 3.4 Business R&D and Innovation 13 3.5 General market development and frameworks 15 3.6 Human Resources 16 4 Major lessons for Lithuania 19 ANNEX A The review visit programme ANNEX B Background Report i 1 Introduction This report gives a reflection of the views of the experts who have reviewed Lithuania in the context of the CREST Open Method of Coordination (OMC) Policy Mix exercise. The expert review was conducted by the following four experts: Mark Beatson Department of Trade and Industry, United Kingdom Stef Smits Ministry of Economic Affairs Dr. Boris Pukl Slovenian Research Agency Jan Windmüller Danish Agency for Science, Technology and Innovation Werner Wobbe EC observer To prepare for their visit to Lithuania the experts were provided with a background report written for the purpose of this policy review. The OMC Policy Review Background Report (Annex B) on Lithuania provides information on the Science Base, Business R&D and Innovation, Economic and Market Development, Human Resources and the overall Innovation System and its governance. The visit of the experts to Vilnius took place on March 14 to 16, organised by the Ministry of Science and Education, but with visits to a number of agencies and firms, as well as the Ministry of the Economy. The programme (see Annex A) included representatives from many stakeholders involved in science, technology and innovation from the public and private sector. Annex A also gives a list of these stakeholders and indicates the issues addressed. The review team would like to express their gratitude and compliments for the organisation and the overall participation to the review. A first version of this report has been used for the feedback mission to Lithuania on May 22. In that feedback mission, the review panel was represented by Mark Beatson, DTI, and the rapporteur Jakob Edler, accompanied by Isi Saragossi, Director within DG Research of the Commission, and his colleague Matthieu Delescluse. The report had an enormous visibility within Lithuania and was discussed widely. During this feedback mission, the OMC delegation was able to introduce the report personally to a high level group of politicians, including the Prime Minister, the Minister of Finance and the Minister of Science and Education. A further session of that feedback mission included approximately 50 high level stakeholders mainly from the science base and the administration. After that mission, minor changes have been done in this report. On June 13 this report was discussed in the CREST OMC group and well received. This review report summarises the observations made by the experts; its synthesis is based on the themes discussed in the review process and provides recommendations for Lithuania. The report reflects the situation at the time of the review. Before Section 3 discusses the Commentary by the reviewers, Section 2 provides a summary of the Lithuanian RTDI system and the Policy Mix, in fact a summary of the background report, which is attached (Annex B). Section 4 summarises the major lessons and recommendations for Lithuania. 1 2 The Lithuanian R&D and Innovation System and Policy Mix Lithuania is a small and catching up economy with a GDP per capita of 52.1 % of EU average, thus ranking number 23 out of EU 27 (Eurostat). Coming from a rather low level, its growth in GDP in the year 2000 to 2005 has been considerably higher than EU average and Lithuania performs better than most of the 10 countries that joined the EU in 2004. Measured by various innovation or knowledge economy indices, the country is still lagging behind, but is on a catching up path, though not in all dimensions. In an expertise on the Lithuania Innovation System, the World Bank in 2003 assessed the country to be on a dynamic development towards a knowledge- based economy. Compared to the mid 1990s, the country had improved in the overall knowledge economy index, and overtaken all other countries that accessed the EU in 2004. Albeit the transition path has been largely successful, the innovation system of the country is still to some extent shaped by Soviet legacies in terms of the overall importance of public vis-à-vis private research, the structure and management regimes of the public research system and the relation between the public research and private innovation. Moreover, the country is highly dynamic in terms of tertiary education, but given the hitherto limited resources for the educational sector this seems to be a mixed blessing. In recent years has Lithuania developed more variety in instruments of the policy mix. After the immediate post 1990 changes and the preparation to the EU accession pre 2004, the last couple of years have seen a range of institutional adaptations, and currently a set of policy innovations and framework adjustments are under discussion. Supported by a couple of external assessments of the economy and innovation system, such as the World Bank and the World Economic Forum, it is obvious that the main and most important reason for these changes has been the accession to the EU. The major drivers have been the adaptation to the Lisbon process and the possibilities and requirements stemming from the Structural Funds. The recent – and especially the future – increases in budgets for science and innovation are enormous. The weight and the direction of the Structural Fund have triggered – and will continue to trigger – the most important changes regarding the policy mix governing the innovation system. At the same time, these opportunities put enormous steering and implementation pressure on the administrations and their capacities. In the current transition, many of the institutional and policy changes cannot yet be fully assessed in their effectiveness and certainly have not been evaluated, and thus both in the background report and this review report the assessment of new initiatives limits itself to short informed comments on ongoing developments to feed the discussion rather than providing evaluative evidence. The OMC review meets a window of opportunity in Lithuania and could – hopefully – re-enforce and assist the reform discourse going on. 2 As for the science base1 of the country, Lithuania is still severely lagging behind the average of EU countries in terms of gross expenditure on R&D. The country invested in 2005 0.76% of its GDP on R&D (EU average is 1,85%), and the share of public budget going into the science system is very far below the EU average. With the next phase of Structural Fund allocation, this situation will, however, change with a substantial shift towards science (and innovation) expenditure. Although the statistical information seems to be somewhat unreliable and underestimate real figures, the extremely low expenditure of private companies in R&D in the country is striking. It signals, above all, a low level of absorptive capacity in the business community. Contributing to this challenge of low absorptive capacity is the somewhat problematic age structure of the scientists and the rather low number of PhD produced in the system. In terms of scientific output, publication and citation data shows a strong increasing tendency, the country is catching up. The institutional structure is fragmented and given the size of the country, the number and variety of institution is considerable. The governance of the public research base is characterised by a large share of institutional funding and closed internal governance structures. The division of labour among these public institutions is not fully defined, and cooperation between science and industry is, compared to most other countries, low. Furthermore, the dynamic in terms of innovation activities stemming from the research base – e.g. in terms of cooperation or spin offs – is limited in part due to legal barriers, as – for example – spin offs from Universities are hampered and intellectual property exploitation through Universities meets obvious legal and institutional limits. Against this background, the policy goals in terms of science are ambitious. They are set within the Lisbon framework and, by and large, strive at catching up with established EU member states in terms of both the level and scope of scientific activity and science – industry relation and in terms of governance of the funding system. There is current discussion among actors in the innovation system about the need for institutional change, one proposed model being a dual funding system based on a new Research Council (basic) and Innovation and Technology Agency (application oriented). Both institutions would implement programmes and thus change somewhat the imbalance between large institutional funds and rather small programme based funds towards the latter, with more strategic orientation. There is already a range of new programmes running and further ones are under discussion, such as National Integrated Programmes, to develop targeted technological areas and economic sectors, and to be funded through Structural Fund budgets, or the Integrated Research, Study and Innovation Centres (Valleys) to link universities, institutes and companies in science-industry clusters strategically.
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