Innovations in Belarus: When Dreams Come True
In the recently released state budget of Belarus for 2013, support of science features among the top priorities. This could signify a change of policy because for years state financing of science has been unacceptably low.
Even with the increase in subsidies, achievement of ambitious goals in the innovation sphere has looked quite problematic. For instance, in 2011 one goal was to increase threefold the share of R&D products in Belarusian exports. But this year the percentage of such products in the overall country’s export declined by a fourth compared with 2011.
The government, however, wants to persist. Disappointed at Belarusian fundamental sciences, it is now focusing on commercialisation of intellectual property, attracting investments into innovations and hosting foreign technologies.
Foreign Investments: not just Money
Belarus has been claiming high interest in attracting investment in innovation since 2005. But only this autumn Mikhail Miasnikovich announced a new trend: Belarus prefers to attract investors with both money and technologies. The reason is that “we have no time for adapting technologies through the full technological circle”.
Probably, this decision comes not only from the fear of non-compliance with the ambitious goals set for 2011-2015. Belarus may turn out to be simply unable to reach the status of an innovative nation at a global level on its own.
Since 1994 the research intensity of Belarus’ GDP has fluctuated by between 0.63% and 0.97%. Generally, if this index falls under 1%, the nation’s scientific and technological potentials start to regress. It means that for the last 18 years the regression of Belarusian science and technologies has never stopped. Considering the technology boom which the Earth has seen during the last two decades, the negative result of such decline looks even more irrevocable.
Speaking about attracting investment, the Prime Minister emphasised that the government will provide investors with the necessary comfortable conditions: “Our legislative basis is good enough. Both our foreign partners and international financial institutions with whom we work mention it”.
Tax privileges are among the main hooks the state is using to attract investments. Exemption from corporate income tax (the statutory rate is 18%) granted with respect to income from sale of innovative goods of own production seems particularly attractive. Belarus also offers to innovative companies various types of free of charge assistance, such as marketing researchers and support of cross-border activities.
Tax privileges worked well in the case of the High Technologies Park. Belarus has become a global player in the software offshore market. The commercialisation of inventions will probably be more complicated. Producing software requires computers and young Belarusians. For commercialisation of an invention, construction and high quality equipment of a full plant or at least a laboratory are necessary. This means bigger investments and bigger risks for investors - another thing Belarus still “offers”…
No Science in Belarus?
The bias for the commercialisation of technologies at the expense of boosting fundamental science is not new for Belarus. Already in 2011, Lukashenka explained why he had reduced subsidies to the National Academy – Belarusian fundamental science’s cradle – by between 25 and 30 per cent. He announced the rules of the game, pointing out that the prior task now is import substation: “Should you provide it – we will support you, otherwise do not expect state support”.
According to the United Nations Economic Commission for Europe, already in 2008 the share of fundamental research in the total amount of R&D financing was only 36 per cent. In the Commission’s opinion, such a trend is appropriate from the near-term outlook. However, it is questionable from long-term perspective and in future is likely to worsen the overall R&D’s potential of the country.
Another detrimental consequence of this bias is a very low, if not adverse, financial incentive for Belarusian researchers. Disclosure in October of the salary of a scientist at the National Academy of Science resonated widely in Belarus. It amounts to about $230. A Minsk driver earns approximately between $500 and $1000 per month...
The figures do not only suppress innovative thinking among Belarusian scientists. They also persuade young Belarusians to choose another way of making money, despite their possible passion for research. The trend has already caused ageing in Belarusian science: namely, the number of pensioners among doctors of science (the highest scholarly degree in Belarus) has reached 60 per cent.
Still, money is not the only problem for Belarusian innovative development. The 2011 report of the United Nations Economic Commission for Europe on Belarus points to the administrative character of Belarusian innovation policy as being among the main problems.
The Commission’s experts note that because of Belarus’ “vertical approach” to the economy, institutions, programmes and laws have overfilled its innovations’ system as well. At the same time, on the horizontal level, the infrastructure has become quite helpless.
To be clear, National Academy of Sciences conducts about 90 per cent of fundamental and 70 per cent of applied research studies. As a rule, engineering design works are the task of special departments of the Ministry of Industry. Big state enterprises act as the main customers of innovative commodities. But these actors do not cooperate with each other directly. Interaction between the National Academy, enterprises and design companies is a matter of interest and relies upon agreement between the higher state agencies to which the actors are subordinate.
The main result of such an approach is low practical implementation of existing inventions. However, it also leads to a decrease in the effectiveness of spending the finances provided for R&D. The state should probably correct this fault before blaming the National Academy of Science for insufficient results.
Will Venture Investments be the Answer?
However, the situation may improve because the government itself seems ready for changes. Belarus is about to launch a mechanism of venture investment. A special law on this issue enters into force in January 2013. Creation of the necessary infrastructure is already in process.
The state is also trying to provide practical filling for this new framework. The middle of November turned Minsk into the city of business forums. Attraction of venture investment was among the core reasons for holding the 7th Belarusian Investment Forum, International Week of Entrepreneurship, and the 1st Youth Innovation Forum in Minsk.
Venture investing does not offer a solution to the core problem: regression of fundamental science because of poor financing and a rigid administrative approach. These are the challenges foreign investors are unable and, probably, unwilling to address.
What venture investors can do, is to motivate creativity and entrepreneurship in Belarus. If the government learns not to interfere too much with the market economy, venture investments may prove very effective. But the Belarusian authorities still have a long way to go.