The European Union (EU) trails when it comes to laying the foundations for a “smart” economy, with the US, Canada and Japan pressing ahead, warns a new report from the World Economic Forum (WEF).
A stubborn “digital divide” in Europe, which fractures between an “extremely well-performing north” led by Finland, Sweden and the Netherlands, and a static south and east, is to blame says WEF.
“The EU is increasingly falling behind globally in building the digital infrastructure and innovative capacity that would allow its economies to unlock new sources of growth,” the report states.
WEF criticises the EU for not being as favourable to young entrepreneurs and start-ups as other regions, due in part to heavy regulation and fewer funds to start businesses.
Low patent application numbers, with half the activity of the US and less than half of the activity of advanced Asian economies, suggest, not just less innovation, but the “lack of knowledge and capacity of SMEs to efficiently deal” with filing patents.
Speaking at the launch of the report on Tuesday (10 June), the EU’s top civil servant, Catherine Day, secretary-general of the Commission, said, “The machine is not broken but it certainly needs firing up.”
“I think it’s very clear that the post-crisis world will not be the same as the pre-crisis world,” said Day, “We are more divided than before.”
At a separate event on the same day, the Commissioner for research, Máire Geoghegan-Quinn, called Europe’s comparison with countries such as the US and South Korea a, “wake-up call.”
R&D expenditure in the EU, overall, amounts to 1.6 per cent of GDP, some way below the Europe 2020 target of 3 per cent, and some distance from the 2.8 per cent outlay in the US.
Top to toe: the north and the rest
The countries included in the EU top ten for overall competitiveness remain unchanged from the last WEF rankings released in 2012 as the UK, Luxembourg, Belgium and France held on to their spots.
Finland leapfrogged Sweden as the most innovative all-round nation in the 28-member bloc, with its success built on strong education and training, the report notes.
Malta made the most noticeable move, from 18th to 14th position, while Slovenia dropped from 13th to 16th. The EU’s newest member, Croatia, is 24th.
While some northern European countries are so good that they outperform the US, the bloc overall is hindered by an innovation divide that separates the best performers, headed by Nordic countries, from the worst, which are Hungary, Bulgaria and Romania. Slovakia, Poland, Italy, Cyprus and Latvia are among the rest of the bottom member states.
The report says that these countries have made the least progress in enacting the aims of the digital agenda, which has as its chief aim the rollout of high-speed broadband. For example, in Cyprus, the country is nowhere near exploiting the full range of information and communications technologies (ICT) in the business world.
While Hungary has scientists and engineers, the low access to funding is where the country’s biggest failing lies, says the study. Romania, the worst performer in the EU, is making some good inroads into renewable energy production, and ranked in the top half of the EU in this field, but needs to concentrate more on developing industry-university alliances, claims the analysis.
Keep priming the innovation pump
On the same day the European Commission launched a communication reiterating the importance of investments in research and innovation at national level to create jobs across the EU.
Increasing research and innovation investments was a proven driver of growth, said Geoghegan-Quinn, calling on member states to prioritise such investment as governments regain lost margins in public accounts.
"Fostering innovation is widely accepted as the key to competitiveness and better quality of life, especially in Europe where we cannot compete on costs,” she said.
“This is a wake-up call to governments and businesses across the EU. Either we get it right now or we pay the price for years to come."
The communication, which suffered some setbacks and delays in its early development inside the policymaking walls, highlights three broad areas of reform, including improving the quality of strategy-making and policymaking that is underpinned by a stable multi-annual budget.
Another area of reform includes strengthening the quality of research and innovation programmes by reducing administrative burdens and more competitive allocation of funding.
And the final area of reform recommended involves improving the quality of public institutions performing research and innovation through new partnerships with industry.
When asked on the likely impact of the Commission’s statement, the Commissioner said, “Research ministers find our statements very useful for arguing for more research funding.”
Showcasing gains
The announcement included a self-assessment report of the research department’s last four years, which, while it shows progress has been made, stressed that it, “will take some time before the projects and actions funded bear fruit.”
Some of the main commitments by the Commission since 2010 have included breaking the ground for a pan-European unitary patent, improving the role of innovation in regional funds and establishing dedicated cross-border research infrastructures.
The only commitment the Commission marks itself down in was the failure to push through a proposal to the European Council, the EU body representing member states, calling for countries and regions to set aside dedicated budgets for, “pre-commercial procurements and public procurements of innovative solutions.”
The full WEF report, published every two years, is available here.
To read the Commission’s new communication, visit here.
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