Special Promoting an innovative economy: the Belgian National Reform Programme [ Article 2006121803 - 15/12/2006]

Innovation and economic performance

The long-term growth performance of Belgium depends on many factors, one of them being its ability to innovate. For this reason, the federal and regional governments have put innovation policies high on the political agenda.

Graph 1 shows the relationship between the Summary Innovation Index (SII) as developed by the European Commission and an economic performance indicator (the annual growth rate over the 2000-2005 period of total factor productivity). The SII is a composite indicator taking into account innovation drivers, knowledge creation, entrepreneurship, applications and intellectual property. The use of a composite indicator is open to criticism, but it has the advantage of bringing together many different aspects of innovation. The total factor productivity (TFP) indicator is an indication of the technical progress of the economy (brought about by inter alia innovation) and influences productivity and economic growth positively.

Countries with high innovation scores also have a strong economic performance. This is shown here by the performance measured by TFP-growth.

In a European context, Belgium is considered to be a slightly above-average performer. It is particularly strong in innovation drivers (such as tertiary education or broadband penetration) and knowledge creation (e.g. the amount of business-funded research done in universities or the public funding of innovation). On the weaker side, innovation applications should be mentioned (the share of high-tech exports or the share of employment in medium- or high-tech manufacturing).

The amount of R&D expenditure in the public and private sector in Belgium falls short of the 3%-objective. Recently, the share of R&D expenditure by the business sector has been falling. The provisional figure for total R&D expenditure for 2004 is 1.93% of GDP. In order to attain 3% in 2010, R&D expenditure has to increase by 1.07% of GDP, which implies considerably higher growth rates than those observed in the past 10 years.
Innovation policies are broader than research policies, which implies that many political bodies and actors are involved in the design of an innovation policy.
The renewed Lisbon Agenda (2005) puts a lot of emphasis on innovation policies in its overall aim to improve the growth performance and jobs creation in the European Union. “Integrated Guidelines” were drawn up in the area of innovation and in other areas and became the central instrument for coordinating economic policy in the EU. Within the context of the renewed Lisbon Agenda, each Member State has to submit a National Reform Programme (NRP) every three years, in which the Member State draws up the political priorities to achieve the Lisbon goals. In the framework of these programmes, the Member States of the EU will ensure the transposition of the European objectives to the national level. Indeed, the major part of economic policy is determined at the national, and not the European, level.

The first programme of this kind, drawn up in October 2005, covered the period 2005 – 2008. In the course of the second and third years of the cycle (2006 and 2007), progress reports are intended to  pinpoint the priorities that have already been achieved and the way in which these priorities have possibly changed. In 2008, new Integrated Guidelines will be fixed and new priorities will be included in the NRPs. The Belgian progress report was approved in October 2006. It gives a description of the measures taken from October 2005 to October 2006 and announced in the Belgian NRP 2005-2008.
Innovation policy in the Belgian progress report to the NRP 2005-2008

As stated in the National Reform Program for 2005-2008, R&D and innovation are one of the six priorities of the Belgian authorities. The efforts being made by every authority aim to:

• promote R&D by increasing private and public investment in R&D, by strengthening networking and internationalisation of research and by supporting knowledge transfer and enhancement of research activities;
• boost human resources in R&D;
• promote the dissemination and use of ICT.

Measures to promote private and public R&D

All of the public authorities have raised their R&D budget in 2006. According to an initial estimate, government budget allocations for R&D are expected to rise by around 8% in 2006. This means that government funding on R&D should rise slightly from the 0.58% of GDP observed in 2005.

The policy of clustering innovative players has been strengthened by the development of competitiveness and competence poles bringing together businesses, training centres and public and private research centres in a bid to achieve excellence in key sectors at international level. The Walloon government selected four poles (life sciences, air and space transport, agro-industry and transport and logistics) and 20 or so research projects. Brussels is focusing on three key sectors of innovation: ICT, health and the environment. Flanders is continuing to invest in the competence poles (the automotive sector, logistics, mechatronics and geo-information) and strategic research. The strategic research centres are geared towards excellence at international level in four sectors: micro-electronics and nanotechnology, biotechnology, the environment and energy, and broadband technologies.

To ensure that investment in research bears fruit, the conversion of research results into industrial activity is being promoted by partnerships between universities, research centres and businesses, and by the transfer of knowledge and technologies between these actors. The different Belgian governments have improved their patents and intellectual property legislation in order to make access to patents easier, especially for SMEs, and to strengthen the protection of intellectual property. The regions have also set up incubation centres (for biotechnology by the Flemish, Walloon and Brussels regions and for NICT by the Brussels region). Moreover, the Walloon region has set up a Technology Promotion Agency in a bid to enhance the transfer of research findings to the business world. The industrial research fund, which allows universities to pursue their own applied research policy  aimed at economic ends and to work in partnership with businesses, was also enlarged. In 2006, Brussels launched the ‘Spin-off in Brussels’ program which offers academic researchers funding for two or three years so that they can start up their own spin-off company. Also in 2006, the Walloon Region stepped up its financial support for spin-offs and spin-outs and launched a postdoctoral programme called FIRST to provide partial funding for a two-year R&D project.

Measures to boost human resources in R&D

To strengthen job creation for researchers, a 50% reduction in withholding tax for them has been in force since October 2005. This applies to private companies that employ researchers as part of scientific research projects conducted in partnership with universities, higher education establishments in the EEA or approved scientific institutions. From July 2006, this reduction applies to all personnel (except administrative and sales staff) of small, 'new' companies (i.e. under 10 years old) that spend at least 15% of their budget on R&D. Finally, since January 2006 companies have had their withholding tax reduced (currently by 25%) for researchers with a doctorate in sciences or applied sciences, medicine, veterinary medicine or civil engineering. In March 2006, this measure was extended to include researchers from the biomedical sector, agricultural engineers and researchers in chemistry, biology and physics.

In 2006, Flanders launched the Methusalem programme, under which universities receive long-term funding each year to enable high-level researchers to continue their research projects. The region has also launched the Odysseus programme to attract top foreign researchers, by offering them substantial funding for a period of five years so that they can assemble a research team.

Finally, work is under way to encourage more school students to study science and technology subjects at university, for example by organising competitions on scientific themes.

Measures to promote the dissemination and use of ICT

The Belgian 'e-government' policy consists of three main elements: promoting IT at government level, promoting IT within society and exporting Belgium's ICT expertise. The measures adopted include developing a national action plan to bridge the digital divide, supplying the 'Internet for all' package at the lowest possible price, making adults and children more knowlegeable about PCs and the Internet, developing a technical infrastructure and introducing transparent standards for exchanges between public administrations, taking part in a European e-Government Resource Network, bringing in the electronic ID card and encouraging the development of e-Procurement, e-Health and e-Justice.

Finally, higher education establishments in both Wallonia and Flanders will enjoy ultra-high-speed Internet access (one gigabit per second) in 2007 thanks to collaboration with the Federal Public Service BELNET.