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 2012 to 2017, the value added by ICT services increased by 18.3%, while the valued added by ICT manufacturing increased by 22.5%. 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 includes the identification and sharing of best policies and practices, based on the findings and recommendations of the ICT Innovation Study.
- Developing common training packages for addressing the needs of the main groups of ecosystem stakeholders in the region (policy makers, ICT innovation infrastructure organisations, ICT and non-ICT related businesses).
- Promoting the networking of innovation ecosystem players within the region and with the EU, through networking events and study visits. Establishing an annual Start-EaP week synchronised with a major Start-up Europe event.
- Extending Start-up Europe networks and platforms to include the Eastern partner countries. This includes for example the Enterprise Europe network, Business Angels Europe and the Accelerators Assembly. As a next step, EU4Digital will assess the need for, and implement as appropriate, additional ICT-based cooperation functionalities among ICT-related techno-parks in the Eastern partner countries.
- Implementing promotion campaigns in the Eastern partner countries for raising awareness of the importance of ICT innovation.
- 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 the implementation of a DISC-like initiative (which was initially launched in EU countries) in the Eastern partner countries.
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 will facilitate the flow of European risk investments into Eastern partner countries.
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 aims to measure the need and possibilities for the implementation of a similar initiative in the Eastern partner countries. In order to achieve this, the EU4Digital Facility has launched a new activity - 'Market assessment for the Digital Innovation and Scale-up Initiative (DISC study) in the Eastern partner countries’.
The Market Assessment will support the European Commission in understanding the investment gap and serve as a basis for considering the implementation of a DISC-like initiative (specific EU financial support mechanism) in the Eastern partner countries to support local high tech start-ups and scale-ups, their access to finance and their development within the region.
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.
6. What about the training packages? Who are they for and which skills gaps do they address? When can we expect them to come into force?
The common training packages aim at the main groups of ecosystem stakeholders in the Eastern partner countries:
- Local policy makers,
- ICT innovation infrastructure organisations,
- ICT and non-ICT related businesses.
The training packages envision different modules for the target groups to address their specific needs. Each of the modules is aimed at teaching the stakeholders on how to leverage the existing ICT networks and infrastructures as well as emerging technologies and trending applications
The work towards development of the training packages is built heavily on the ICT Innovation Study that identified the skill and knowledge gaps in each of the Eastern partner countries. These focus areas serve as a basis for the development of the modules for each of the target groups of stakeholders.At the end of this activity, EU4Digital will provide the stakeholders with access to the comprehensiveonline mapof the courses included in the common training packages and delivered through globally recognised eLearning platforms, thus enabling the stakeholders to develop the necessary skills and understanding needed to take the innovative value-adding approach to their business processes.