Not only the Flemish government, but also the Flemish business world and knowledge institutes have committed to the Innovation Pact in order to make Flanders a top region in the global knowledge society. The VRWB has created a new implementation of the VRWB reference instruments in order to monitor their common efforts and the effects of the same. In addition, the Council has made an evaluation of the budget efforts for R&D of the Flemish Government.
The Council concludes that the Flemish government will need to make significant additional financial efforts to attain the objectives of the Lisbon and Barcelona agendas. If we compare the Flemish scores for the 11 core indicators internationally, and more precisely, to the EU-25 average Flanders still appears to have rather a mediocre innovation profile. Little or no progress was moreover recorded in a number of indicators over the last five years. It is therefore essential that all partners collaborate under a comprehensive vision and a consistent strategy in the medium to long term, in which interaction and collaboration need to be central, in conformity with the commitments made in the Innovation Pact.
200 MILLION EUROS REQUIRED ANNUALLY TO ACHIEVE THE 1% STANDARD BY 2010
For 2007, the total budget for the Science and Innovation domain, managed by Minister Fientje Moerman, works out to an amount of 741 million EUR, more than 8 million EUR less than in 2006. In previous years, however, an important part of government commitment consisted of one-time credits. Thus, the drop in 2007 can be ascribed to the fact that the one-off credits for the Flemish Innovation Funds were dispensed with (these amounted to 75 million EUR each in 2005 and 2006). If we make an abstraction of these VINNOF resources and only consider the structural resources, we observe that the Flemish Government, in line with the Government Agreement, is nearing its commitment of the Innovation Pact and has even extended 65 million EUR in additional resources for science and technology.
The total in credits for scientific policy in all departments (cf. Horizontal Budget Programmes in Scientific Policy) amounts to about 1.56 billion EUR in 2007. About 953 million EUR are designated for research and development, which is a slight drop with respect to 2006. Based on these figures, the VRWB estimates that in 2007, for the first time in years, the government share in the R&D efforts in Flanders will fall back from 0.73 % to 0.68 % and that we are slipping further from the 1% standard in this way.
In order to still achieve the 1% objective around 2010, about 600 million EUR of additional structural governmental efforts for R&D are required, which boils down to an additional annual amount of about 200 million EUR. The annual increase by an additional 60 million EUR planned in the Innovation Pact is thus absolutely too low, and it would be best to use any windfalls from the budget for R&D. The requirement for more resources is one of the main messages that the VRWB wants to transmit to the policy makers. In the VRWB recommendation 114 'The further expansion of the Flemish Scientific and Innovation System with attention to budgetary balances', the Council indicates how these additional resources should be used.
ALSO COMPANY INVESTMENTS IN R&D SHOULD INCREASE
If we observe the R&D intensity (GERD) in Flanders, we see that it appeared to recover slightly to 2.09% in 2005, after the low point in 2004 (2.03%). The 3% objective has however not been achieved at all. It is certainly noteworthy that we once again saw a slight increase in R&D expenditure of companies for 2005. With a score of 1.46%, the Flemish BERD is nonetheless far below the peak of 1.84% in 2001 and even further removed from the 2% objective.
The VRWB emphasises that the 3% standard should remain the guideline. In view of the falling trend of private expenditure, and the delayed growth in government spending after 2001, it is vitally important that the government as well as corporate sector maintain their commitments made in the Innovation Pact. A favourable innovation climate can help the corporate world and knowledge institutions in this regard.
LACK OF HUMAN CAPITAL IS A RISK
Since 2004, we note that the falling trend in the share of R&D employees in the total professional population in Flanders has reversed. In 2004, this positive change could still mainly be attributed to additional appointments made by higher education institutions. In 2005, the growth was more evenly spread across the different sectors. Perhaps it is still too early to see an effect of the gradual introduction of a tax measure in favour of lowering the salary costs of researchers (i.e., the reduced corporate tax rate payable on researchers) on the population of researchers within enterprises in Flanders.
A sufficient basis of Science & Technology degree holders is essential for developing R&D activities and its absorption, and in a more extensive sense for setting up a knowledge economy. Although the most recent generation of Flemish twenty-year-olds is very well-educated, even in the international perspective, the share of higher degrees in mathematics, science and technology in this group is relatively rather low. With 20.5%, Flanders is placed at the bottom of the European group. For a region in which competitiveness relies mainly on knowledge-intensive and high-technology companies and services, this observation is negative and rather alarming for the future. Many companies, mainly the R&D-intensive ones, but even the knowledge institutions, are now already experiencing difficulties in recruiting sufficiently skilled young scientists due to a lack of new science and technology degree holders. The call to attract more researchers from abroad is becoming increasingly louder.
INCREASINGLY MORE COMPANIES ACTIVE IN THE AREA OF INNOVATION
With a share of almost 59% of innovative companies in the total population of companies, Flanders again scores very highly in 2004 (cf. CIS-4). We have the absolute top spot in Europe, as far as this standard is concerned (EU-27 average amounts to 42%). Within the group of large enterprises, high-tech companies and companies from the service sector, the population of innovative companies has actually increased sharply. Large companies in Flanders are more innovative than ever before, and much more so than the Flemish SME's. An important conclusion we can draw from this is that an increasingly large number of companies - and more so those in the service sector - wants to indicate that they are involved in R&D.
RISK CAPITAL INVESTMENTS ARE BEHIND COMPARED WITH THE AVAILABILITY OF RISK CAPITAL
In the area of risk capital investments, Belgium has one of the worst scores in Europe in 2005. Moreover, there is no improvement visible in this area, and even the inverse is true, regardless of more government initiatives. More measures such as the federal notional interest rate deduction, the Flemish VINNOF, ARKimedes, etc., are probably still too recent to have had an effect on the available data. All the more so since indicators are related to the effective investments in risk capital and not on their availability for capital-intensive enterprises. Much more importantly, Belgium has fallen back to the European average in the area of early stage investments in 2005, much below the investment levels in the Scandinavian countries and the UK. In 2000, our country still belonged to the top group in this area. It is therefore required to systematically track risk capital investments and to also review whether the instruments are complementary to each other, whether they offer support to the enterprise during the entire life cycle, and whether the selection criteria and allocation conditions conform to market requirements.
VALORISATION OF RESEARCH IS ON THE RISE
As far as the number of EPO applications with a Flemish inventor per million residents in Flanders in an international context is concerned, the most recent figures for 2003 show that a significant recovery has taken place in Flanders (+5%). Flanders is performing remarkably better with respect to the EU-25 average; however, we still score significantly lower than the Scandinavian countries and neighbouring countries Germany and the Netherlands. In Flanders, we do not really have a culture for taking out patents. Given the enormous costs of such an EPO application, often only a few large companies can allow themselves the luxury of applying for patents. The process of awarding patents is also sector-related, moreover. Naturally, there are still a number of other efficient, effective manners of protection which often form a cheaper and easier alternative for smaller companies.
It does need to be remarked that knowledge transfer and valorisation of research is much more extensive than just the taking out of patents. Spin-offs, incubation centres, interface services of universities, etc. also play a large role. Moreover, consultation and interaction between knowledge institutions and the corporate sector are indispensable.
As far as the share of innovative products in turnover is concerned, Flanders with its 23.5% scores particularly well in 2004 with respect to the EU-25 average (9.5%). Flanders has further visibly strengthened its position in this area during the recent years. If this trend is maintained, the objective of the Pact of Vilvoorde - that of achieving the level of 25% in 2010 - appears to be within reach.
The big challenge for the future will be to convert knowledge and innovation into more added value, jobs and welfare. This objective needs to be made explicit within an overall vision and a consistent strategy in the medium to long term. The key players concerned - corporate sector, knowledge institutions, government - need to draw up a framework together, which must go beyond the limits of a legislative period.