Peter Berkowitz, Head of Unit at Directorate-General for Regional and Urban Policy of European Commission, (DG REGIO).
EUR 272 million – such funds are allocated for promotion of research and innovation in Lithuania within period of 3 years, implementing strategy of smart specialization. Starting from 2014, this concept has been implemented throughout the European Union. The strategy is unique that it invests in development of research, experimental development and innovation (Lith. MTEPI) in a targeted way, focusing on priorities that reflect the strengths of the region.
The Smart Specialization Strategy aims to focus investments on areas with the highest growth potential. It is expected that this will bring the greatest investment return to the economies of EU Member States and Europe as a whole, and strengthen the competitiveness of the European region with regards to the US and China.
Peter Berkowitz, currently in charge on implementation of financial and political strategy at the European Commission (EC), states that the strategy has already made a positive change in Europe. “Smart specialization has allowed us to start developing a strategic approach to innovation development, prioritizing research and innovation, and concentrating resources on the most relevant areas for each region. We also see smart specialization as an opportunity to bring together main stakeholders interested in development of innovation and to involve them in the process of selecting priority areas, thereby promoting greater cooperation between the private and public sectors,” says Berkovitz, currently in charge of Unit for Smart and Sustainable Growth in the EC Directorate-General for Regional and Urban Policy (DG REGIO).
Slowly but Accelerates
In 2014, Lithuania has approved six areas of smart specialization that cover 20 priorities. “Research, Development and Innovation (MTEPI) of these areas have been allocated the main part of EU investment to accelerate the pace of growth in these areas and thus further strengthen the contribution of these areas to the economy. As half of the time for the program implementation passes, an interim evaluation of the implementation of the strategy is carried out. It aims to determine whether investments induced the emergence of projects and whether these projects have the ambition to bring economic returns in the future, as well as, it is monitored whether thematic concentration occurs, the way links are established between science and business, and strengthen scientific potential,” stated Ramojus Reimeris, head of the Centre (MOSTA).
The assessment carried out by MOSTA and the Ministry of Economy of the Republic of Lithuania revealed that smart specialization has so far been hard to find a way of transforming the economy in Lithuania. “As half of the time for the program implementation has passed, we think that only one-third of the program funds has been allocated, and at present, 100 projects have not been reached in any of the priorities. So it can be said that the absorption potential of the priorities is not as high as we expected,” says Reimeris.
According to head of the MOSTA, there are several reasons why we cannot be satisfied with the results of the strategy. “First of all, it is important to emphasize that although the program has been launched in 2014, the vast majority of funding instruments were introduced much later than expected. Therefore, the actual starting date of the program should be considered the year 2016. From this point of view, it can be stated that the program has just started to accelerate,” says Reimeris.
It is likely that the volume of investments and number of projects in the strategy will change in the course of the program. “We notice that in the priority areas, there is a closer relationship between science and business, and deepening of scientific knowledge. Also, our researches show that the timing of investment payback varies between 2 and 6 years. As a result, it is likely that the vast majority of products and outcomes foreseen in the program will be developed over the next few years. Only then we will be able to assess the first and preliminary impact of smart specialization on economy in Lithuania,” says R. Reimeris.
The Analysis Reveals the Strongest Priorities in Lithuania
While priorities showing critical mass have not been identified by analysts yet, the report already highlights priorities showing the highest performance and potential. The four main priorities show the highest efficiency and potential: molecular technologies, functional materials, laser technologies, and public health. These areas include companies such as UAB ThermoPharma, “Rubedo sistemos”, “LT Biotech” and others, as well as teams of scientists from the Centre for Physical and Technological Sciences, the Centre for Life Sciences and other scientific institutions.
“Priorities with highest performance are distinguished by the volume of attracted investments, increased cooperation between science and business, increasing human capital as well as internationally important scientific publications,” says R. Reimeris.
The priorities of transport corridors and digital construction show the lowest potential and performance. These priorities attract relatively small amount of private investment, create fewer products and service prototypes, business less cooperates with science, and limited participation of these priorities is observed in smart specialization program.
“One of the main benefits of smart specialization is that we have been able to start shaping the existing innovative initiatives more consistently. Financing is no longer shared in small amounts to all, but on the contrary, it focuses on areas where we are already strong and which have the greatest potential for growth and transformation of the public economy over time, thus increasing our international competitiveness. In order to move into this direction, we should continue to focus our investments on the priorities we have chosen,” says Reimeris. “However, the content of the program should be updated. We should include technologies that have become relevant in recent years, and the state should also take a more active role as a facilitator: not only to provide financial support, but also to help cope with bureaucratic procedures, establish partnerships and otherwise promote projects.”
The selected directions for smart specialization help to generate a quarter of gross domestic product in Lithuania, 8.2 billion of value added. The largest share of GDP is generated by: manufacturing processes and materials (8.1% of GDP) and transport, logistics and information and communication technologies (4.3% of GDP). Also, the companies in the Smart Specializations sector also employed 41% of all the employed in the country.
The interim evaluation of smart specialization was carried out to assess the benefits of investing in priorities. Evaluation is performed by MOSTA and the Ministry of Economy of the Republic of Lithuania. The Government Program of the Republic of Lithuania states that the renewal of smart specialization directions will be carried out based on the interim evaluation and the results of the progress at the end of the year 2018. After analyzing the results of the evaluation, decisions will be made on investments in relevant directions or formulation of new thematic directions and recommendations for future priorities.