1. ICT Innovation is clearly vital to economic development in the digital age: how far behind are the Eastern partner countries compared to the European Union?
ICT Innovation is a driving force for socio-economic change. ICT equips countries with tools to reorganise and globalise their economies, achieve faster economic growth, create new jobs, raise living standards and reduce inequalities. In the EU, the ICT sector is significant and developing rapidly – from 2013 to 2018, the value added by ICT services increased by 27%, while the valued added by ICT manufacturing increased by 31%. The value added by the ICT sector was equivalent to 3.6% of GDP in 2017 in the EU, and the sector is currently one of most efficient of the EU economy: in 2017, the apparent labour productivity of the ICT sector was 65.2% higher than that recorded for the non-financial business economy as a whole, making up to €117,600 per person employed in Belgium, and around €100,000 in Finland and France. However, the biggest effect of ICT is that it is one of the few sectors that enables the creation of general purpose technologies that contribute to productivity and value added of traditional sectors of economy, via digitisation and digital transformation.
The Eastern Neighbourhood countries have also seen a rise in the growth of the ICT sector: ICT service export share in 2017 made up around 5% of total exports and around 19% of the service export in Belarus and Ukraine. The region is rich with innovative ideas, and some solutions have already become global. However, the innovation ecosystem of the countries, which has a high potential to contribute to the development of non-ICT sectors of the economy, lags behind that of the EU. Whereas there are over 80 business incubators and 150 accelerators in the EU, the ICT Innovation study has counted only 42 incubators and 19 accelerators in the Eastern partner countries.
ICT-enabled development in the region should include more coordinated efforts to address the lack of support from national ICT ecosystems, which is crucial to leverage ICT for sustainable economic development. A fresh impetus should be given to promote seed and venture funding, acceleration programmes, networking and clustering and address needs for specific competences and skills to work on global markets. These elements are vital for a seamless and strong ICT sector. Inadequate attention to innovation ecosystems leads to a brain drain and start-up drain from the Eastern partner countries to those countries with a better developed ICT ecosystem. EU4Digital aims to contribute to enhancement of such ecosystems to enable the growth of companies within the region, their contribution to GDP, export and workplaces.
2. What does EU4Digital do in the area of ICT Innovation?
EU4Digital has five lines of action in the area of ICT Innovation:
- Setting in place a common legislative framework in the Eastern Neighbourhood region that favours ICT innovation, based on EU norms and best practices. This was done in five policy areas prioritised by the Eastern Partner countries, and included country-specific policy recommendations and action plans that were taken by the country stakeholders for further implementation.
- Developing a common framework for a modular training package (EdTech Hub programme) for addressing the needs of SMEs and other groups of ecosystem stakeholders in the region (policy makers, ICT innovation infrastructure organisations).
- Promoting the networking of innovation ecosystem players within the region and with the EU, through networking events, study visits and the establishment of an ICT Innovation Governance and policy coordination forum for key EaP stakeholders.
- Extending European networks and platforms to include the Eastern partner countries. EU4Digital will identify the relevant EU organisations and facilitate the registration of the ICT innovation and start-up ecosystem players from Eastern partner countries on the relevant European networks and platforms.
- Implementing promotion campaigns in the Eastern partner countries for raising awareness of the importance of ICT innovation and increasing the participation of women in the ICT innovation field.
- Conducting a 'Market assessment for Digital Innovation and Scale-up Initiative (DISC) in Eastern partner countries’ to address the investment gap in digital innovations and to support the scale-up of digital start-ups in the region. The Market Assessment will support the European Commission in understanding the investment gap and will serve as a basis for considering further initiatives on improving access to finance for start-ups in the region. As a continuation, EU4Digital developed a guide for ICT entrepreneurial ecosystem development that provided a maturity assessment of each country, and country-level recommendations to enable the growth of the Start-up ecosystems in the six Eastern partner countries. One of the key tools to implement these recommendations will be the EaP DISC Capital regional venture funding facility
3. What’s wrong with the legislative framework as it stands? Isn’t it more important to support innovation on the ground?
Innovation needs a favorable environment if it is to bloom. This includes access to knowledge, risk-tolerant funding and the right to make mistakes. Entrepreneurs often say they do not need support from the government, what they ask for is for the government not to interfere and allow them to innovate.
The creation of an innovation-friendly environment, however, does need some steps from policy makers. Policy intervention is needed in the areas where market failures are observed – in particular, at the stages of performing fundamental and applied research in deep tech areas, from which innovative companies source the advanced expertise.
A framework for the operation of crowdfunding, business angels and venture capital needs to be introduced that defends both investors and start-ups. Regulatory sandboxes (a controlled environment in which innovations in financial technology can take place while providing safeguards to manage risks and allowing players to experiment with innovative financial product and services) are created to check how new technologies like blockchain and autonomous vehicles can be used to satisfy customer needs without exposing them to risks. The defence of intellectual property rights needs an institutional framework that is harmonised with the world system.
Aligning basic terms and learning from best EU practices, tools and regulatory approaches will allow businesses from the Eastern Neighborhood countries and EU countries to work on similar rules and facilitate the flow of European risk investments into Eastern partner countries.
The EU4Digital ICT Innovation stream developed policy recommendations in five ICT Innovation policy areas prioritised by the Eastern partner countries:
- Intellectual property rights management for digital innovations.
- New organisational forms for supporting ICT Innovation.
- Digitising industry (digital transformation of SMEs in traditional sectors).
- Digital innovation SMEs’ access to finance.
- ICT innovation ecosystems for start-ups and scale-ups.
4. What is the Digital Innovation and Scale-up Initiative and how could it help innovation in the region?
The Digital Innovation and Scale-up initiative (DISC) was initially launched in the Central, Eastern and South Eastern Europe region, and aims to address the investment gap in digital innovations and to support the scale-up of digital start-ups in the region.
Based on this approach, the European Commission aimed to measure the need and possibilities for the implementation of a DISC-like initiative (a specific EU financial support mechanism) in the Eastern partner countries. EU4Digital conducted a ‘Market assessment for the Digital Innovation and Scale-up Initiative (DISC study) in the Eastern partner countries’ that confirmed the funding gap for technology start-ups. In order to address this gap, a guide for developing the ICT entrepreneurial ecosystems has been developed and contributed with recommendations for building the investment capacity, including other areas such as access to education, market, and facilities (resources). One of the tools to implement these recommendations will be the EaP DISC Capital regional venture funding facility, which was designed by EU4Digital ICT Innovation team experts. The facility should offer access to capital and knowledge for technology start-ups from idea to growth stages in the six Eastern partner countries.
5. You mentioned integration with European networks: it sounds good but what does it really mean for innovative businesses in the Eastern partner countries?
The EU has created a number of online networks and platforms for ICT innovation ecosystem players, like start-ups, accelerators, venture capitalists, etc. They allow to connect businesses and organisations in different EU member states to exchange contacts, ideas and participate in shared initiatives and events.
The extension of these online networks and platforms to the Eastern partner countries will allow the relevant stakeholders from the six countries to integrate into the larger EU ICT innovation and start-up ecosystem. Businesses and organisations from the Eastern Neighborhood countries will be able more easily to find relevant counterparts in the EU, investments, services and business partners, which will boost the development of ICT innovation and start-up ecosystems in both regions. The ICT Innovation stream has established direct bridges among leading EU organisations and target stakeholders in the six Eastern partner countries in five priority ICT innovation policy areas via a series of networking events, and currently facilitates further integration and cooperation.
6. What about a common framework for a modular training package? Who is they for and which skills gaps does it address? When can we expect it to come into force?
The common framework for a modular training package is aimed at the main groups of ecosystem stakeholders in the Eastern partner countries:
- Local policy makers,
- ICT innovation infrastructure organisations.
EU4Digital developed a concept to build the EdTech Hub programme for learning of digital competencies in the Eastern partner countries. This is seen as a common digital platform powered by EdTech solutions to address the EU commitment to provide support for 500,000 SMEs and digitally empower 1 million EaP citizens. The programme concept envisages access to high quality content in the priority digital areas (Data and AI, Machine learning, software development, marketing etc.), sourced from established EU-based and global learning content providers to be delivered through globally recognised learning platforms. Its purpose is to increase the competitiveness of SMEs in the digital economy and enhance the digital competences of innovation ecosystem builders (policy-makers and innovation support organisations).