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1 Statement by Prime Minister Prof. Dr. Georg Milbradt on the occasion of the Conference on Cohesion and the Lisbon Agenda held in Brussels on 3 March 2005 ¾ Slide 1: Innovation and the Regions Cohesion and the Lisbon Agenda Cover page Ladies and Gentlemen, I am delighted, as the representative of a European region, to have the opportunity to discuss the topics of the Lisbon Agenda, cohesion and innovation with you today and offer my experience in this regard. I will give you an account of what Saxony has undertaken since 1991 to promote growth, employment and innovation in the region and, therefore, in Europe and what contribution European cohesion policy has made in this context. ¾ Slide 2: Saxony – a central European region I would first like to give you an idea of where the Free State of Saxony is located geographically. As you can see, Saxony is a central region in the enlarged Europe. The biggest cities are Dresden, Leipzig and Chemnitz. Saxony is one of the five new federal states that emerged after the collapse of East Germany. Saxony now has around 4.3 million inhabitants and borders on the neighbouring countries of Poland and the Czech Republic. Before World War II, Saxony was the strongest region in Germany in economic terms. After more than 40 years of planned economy, however, per capita economic performance amounted to only 30% of the level of the old federal states in 1990. Even though the region’s economic power has more then doubled since then, it still has a long way to catch up compared with the European average. For this reason, Saxony is, like all the federal states in eastern Germany, an Objective 1 region within the context of EU structural policy. ¾ The path towards the “knowledge-based economy” within the meaning of the Lisbon strategy was embarked upon in Saxony back in 1991 – with consistent orientation towards technologies of the future and corporate growth. ¾ Saxony presently spends 2.5% of its gross domestic product on research and development (R&E). The target value of 3% adopted under the Lisbon strategy is already exceeded today in the Dresden region with a figure of 3.47%. This is the reason for there being 1,100 companies in Saxony which are active in the field of research and development, together employing more than 10,000 industrial researchers. ¾ However, 95% of these companies are small and medium-sized enterprises. ¾ Three quarters of all companies engaging in research in Saxony therefore attempt to compensate for their size-related competitive disadvantages by organising joint research with higher education institutions, research centres and other companies. 2 ¾ Slide 3: Science and R&D infrastructure At a high financial cost, we have, over the past number of years, built up an efficient higher education and research landscape with universities, polytechnics and non- university research centres. Three of the four universities in Saxony focus strongly on natural and engineering sciences. The scientific location of Saxony is further strengthened by a large number of state- supported research institutions, including the Fraunhofer Societies and Leibnitz Institutes, for example. Most of these research centres are principally involved in future technologies such as microelectronics, materials research, biotechnology, as well as toolmaking and mechanical engineering. Around € 380 million from the European Fund for Regional Development (ERDF) will have been spent on establishing this industrially oriented research infrastructure by the end of the period 1995 – 2006 (including co-funding by Saxony). 21 technology consulting agencies in the Free State help companies to gain access to research results and a further 21 technology business incubators have so far provided assistance to a good 1,500 technology-oriented new businesses with more than 12,000 employees. ¾ Slide 4: High-tech competence in Saxony The economy of the former East Germany was organised in the form of large state- owned enterprises, which were not competitive in market economy conditions by virtue of their structure and obsolete technical equipment and which were closed down, broken up and partially privatised within a period of just a few years. An analysis of the economic structures at the time already showed that Saxony had particular sector-specific centres of competence with appropriately qualified personnel. In this context, I would like to refer especially to the microelectronics sector in Dresden, the automobile industry in Zwickau and mechanical engineering in Chemnitz. ¾ We developed a cluster and network policy in good time for the SME structure of the new Saxon economy which emerged after the collapse of the large state-owned enterprises. ¾ The comprehensive networking of all the important players in the region is important for the emergence of clusters. Networks produce composite, size and specialisation advantages, thus enhancing the competitiveness of the companies concerned. This enables them to introduce process innovations and offer product solutions, the development of which would be asking too much of an individual firm. There are now six such networks in Saxony. - Microelectronics and information technology (“Silicon Saxony”, which I will look at separately), - Automobile construction and automobile industry suppliers (AMZ 2005), - Mechanical engineering (VEMAS), - Medical technology, - Biotechnology and environmental technology, as well as - Aerospace technology. 3 ¾ Slide 5: Main fields of excellence in Saxony – a selection The basis for forming the network was the fact that we again have a critical mass of companies in the respective sectors in Saxony: There are around 200 companies with 20,000 employees active in the field of microelectronics in Saxony, most of which are part of the “Silicon Saxony” network in the Dresden area. Together with their supply companies, the automobile industry in Saxony comprises a total of around 450 companies employing a combined workforce of 60,000. The mechanical and plant engineering sector now also has approximately 430 companies employing a total of 34,000 people. Under the biotechnology offensive adopted five years ago, two technology business incubators were set up for SMEs and start-ups and given around € 200 million in support funding. Each of them now houses six university research groups and more than 30 companies. This guarantees that research, development and production are very closely intermeshed. Together with other core companies in the sector, there are now, with over 1,000 workers, already three times as many people employed as in the year 2000. However, these successes must not hide the fact that we are only at the beginning of the road towards a self-supporting economic structure. Excessively high unemployment still prevails and the proportion of innovative sectors as part of the overall gross domestic product is, despite all the dynamism, still too low. ¾ Nonetheless, the positive experience gathered so far makes us all the more determined to assist the forming of further industrial and innovation clusters in a sustained manner and gear our support policy to sectors with a promising future. The areas of nanotechnology and new materials play an important role in this regard and are already having an impact on our automobile industry and mechanical engineering sector, for example. ¾ Slide 6: Electronics industry in Saxony until 1989 Starting point of “Silicon Saxony”, structures up to 1989 The development of the microelectronics sector in Saxony has provided considerable impetus for our cluster and network policy and I would now like to give an example of this. Dresden already had a certain tradition in the field of molecular electronics with the chair of Prof. Hartmann. Both semiconductors and computers were being produced in the Dresden area back in 1989. Added to this, there was also the Dresden Microelectronics Centre (ZMD), where the first one-megabit chip in the COMECON area was developed. It should, however, be noted with regard to the staffing levels given here that a large part of the workforce, as was the norm in the state-owned enterprises of COMECOM, performed support duties, e.g. as cooks, nurses or nursery- school teachers, rather than being directly involved in production or development. The equipment was utterly obsolete and the structure uncompetitive. What remained, though, were well-trained workers and a population with a very positive basic attitude towards technology. This potential was just waiting to be exploited. The human capital of the region thus became the decisive factor for the industrial location of Saxony. 4 ¾ Slide 7: Chip industry in Dresden 2005 In order to further develop Dresden as an industrial location for microelectronics, we made contacts with potential investors worldwide. We were able to convince two major semiconductor producers, Infineon Technologies and Advanced Micro-Devices (AMD) to invest in Saxony. Dresden is now one of the most modern microelectronics locations in the world. Over the past eleven years, Infineon and AMD have alone invested over € 9 billion in Dresden, with more then 9,000 employees working there on the completion of AMD’s FAB 36. Standard ICs (e.g. memory chips, microprocessors) and ASICs (Applied Specific ICs) are produced together with the Dresden Microelectronics Centre (ZMD), all components for innovative sectors like the automobile, mechanical engineering and electronics industries. ¾ Slide 8: “Silicon-Saxony” Description of the “Silicon-Saxony” network Five years ago, microelectronic companies in the Dresden area set up an especially productive network together with suppliers, higher-education institutions, research centres and service companies close to the sector. They today constitute what is known as “Silicon Saxony”, representing, with the scientific institutes integrated into the network, what is now the leading semiconductor industrial location in Europe. The approximately 170 member companies employ a total of around 15,000 people and generate sales approaching € 2 billion. “Silicon Saxony” is an industrial cluster of European significance which, for its part, strives for inter-regional cooperation.

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