mladen vedris, university of zagreb, faculty of law, "economy: with or without knowledge?"

ECONOMY: ECONOMY: WITH OR WITHOUT WITH OR WITHOUT KNOWLEDGEKNOWLEDGE

Prof dr Mladen Vedriš

Faculty of Law, University of Zagreb

Chair of the Economic Science Department

Zagreb, 3/4 December 2010Round Table of UNESCO Chair:

Beyond the Crisis: Funding a Research Universities in Economic Recession

“When written in Chinese the word crisis is composed of two characters. One represents danger, and the other represents opportunity.”

J. F. Kennedy

The Situation Today The Situation Today

4

CROATIACROATIA – EU – EU

Area,

000 km2

Population, mln

GDP,

EUR*

EU15 3.234 381 -

EU27 4.322 485 11,558,0 mlrd

HR 56 4,4 34,2

mlrd

HR share / EU27

1.3% 0.9% 0.3%

*2006 data

CROATIACROATIA

5

Source: IMD World Competitiveness Yearbook 2010

58 countries included

CROATIACROATIA

6


58 countries included

CROATIACROATIA

7


Developed countries increase their R&D investment:

EU 1,86 % 3 %sa naSAD 2,6 %Japan 3,4 %

* Croatia decreases R&D investment:

2005 1,22 %

2009 1,0 %

2010 0,7 %

Total Total RR&&DD Investment Investment

((as a as a %% of GDP of GDP, 2005, 2005))

Izvor: , , 2007.European Commission Key Figures* 1% Prema World Bank Hrvatska ulaže BDP- a u R&D

8

10

Labor market and Labor market and educationeducation

Source: Eurostat

Country

Overall share of expenditures in

education in GDP

(2006)

Share of expenditures in

higher education in

GDP (2006)

Graduates in natural sciences

and mathematics*

(2007)

Croatia 4,11 0,88 6,8

Czech Rep.

4,61 1,23 12,0

Slovenia 5,72 1,24 9,8

Finland 6,14 1,94 18,8

Denmark 7,98 2,27 16,4

EU 27 5,05 1,13 13,4

* per 1,000 residents 20-29

Graduates, age: 20-29Graduates, age: 20-29

11

Science and Technology GraduatesScience and Technology Graduates((1000 inhabitants1000 inhabitants, , ageage 20-29 20-29 ys ys))

share of science and technology graduates: 5,6 among 1000 inhabitants (age 20-29 ys)

European average: 13

: , , , 2009. Izvor World Bank Croatia Corvengence Report Reaching and Sustaining Higher Rates of Economic Growth June12

0

2

4

6

8

10

12

14

16

18

20

EU-27

Bulga

ria

Czech

R

Estoni

a

Hunga

ry

Polan

d

Slove

nia

Finlan

d

Turke

y

2001 2002 2003 2004 2005

Croat

ia

Structure of the population - Structure of the population - EducationEducation

13

“Opportunity is missed by most people because

it is dressed in overalls and looks like work.”

Thomas Edison

15

-250

250

750

1.250

1.750

2.250

2.750F

inan

cial

Ser

vice

s

Oil,

Gas

and

Coa

l

Che

mic

als

Tel

ecom

mun

icat

ions

Rea

l Est

ate

Oth

er A

ctiv

ities

Who

lesa

le T

rade

Ret

ail T

rade

Hos

pita

lity

Foo

d P

rodu

cts

Mft

. m

achi

nery

and

equi

pmen

t

Aut

omot

ive

Wat

er p

urifi

catio

nan

d di

stru

btio

n

Con

stru

ctio

n

Rec

reat

ion

and

Spo

rts

2000

2006

2007

2008*

Foreign Investment in Foreign Investment in CroatiaCroatiaSelected ActivitiesSelected Activities

*2008 is estimated figure.

Source: Foreign Direct Investment in Croatia (by activity), Croatian National Bank, 2009

Average FDI by activity, millions of €

TO CONCLUDE...TO CONCLUDE...

Poor innovation capacityPoor innovation capacityIndicators Rang

Innovation capacity66

Quality of the scientific research institutions51

Business sector investments in R&D60

University-industry cooperation in R&D 75

Advanced technologies purchased by the State 121

Availability of scientists and engineers 85

Patents per mln inhabitants35

: , 2010Izvor World Economic Forum The Global Competitivenes Report -2011. ( index in detail)* 139 Ukupno rangirano zemalja

16

EnvironmentEnvironment

European Union Transition Countries

18

EU STRATEGY 2020

19

EU STRATEGY 2020 EU STRATEGY 2020 European UnionEuropean Union – – political determinantspolitical determinants (J.M. Barroso) (J.M. Barroso)

On Europe President Barroso believes in

"These are no ordinary times. What Europe needs is a transformational agenda.

Only by working together can Europe have the critical mass needed. We face a choice: either we collectively shape the new order, or Europe will become irrelevant."

IP/09/1272 - Brussels, 3 September 2009

EU STRATEGY 2020EU STRATEGY 2020

20

HOW ABOUT CROATIAHOW ABOUT CROATIA ? ?

developing an economy based onknowledge and inovation

3% of the EU GDP should be invested in R&D

40% at least of the younger generation should

have a tertiarry degree: , 2020.Izvor European Commission EUROPE

21

. Europe faces a moment of transformation The crisis has wiped out years of economic and social progress and

’ . exposed structural weakeness in Europe s economy In , the meantime the world is moving fast and long- term

challenges - , , globalisation pressure on resources ageing intensify.

.The EU must now take charge of its future 2020. Europe puts forward three mutually reinforcing

:priorities

22

What measures should Europe and European What measures should Europe and European countries take to stimulate growth in the next two countries take to stimulate growth in the next two years?years?

Izvor: Ernst and Young 2010 European Attractiveness Survey, str. 5

23

ClustersClusters

Physical Infrastructure

Natural Resource Protection

Environmental Stewardship

Science and TechnologyInvestments (e.g., centers, university departments, technology transfer)

Education and Workforce Training

Business Attraction

Export Promotion

• Clusters provide a framework for implementing public policy and organizing public-private collaboration to enhance competitiveness

Standard setting and quality initiatives

Market Information and Disclosure

Management Training

Cluster-Based Policy Implementation

What is next?What is next?

OPEN ISSUES...... CHALLENGES.....how TO STAY ALIVE

TO SUMARIZE...TO SUMARIZE...CROATIA – GDP CROATIA – GDP

25

Source: EBRD Transition Report 2010: Recovery and Reform, EBRD

CROATIA – THE WAY CROATIA – THE WAY OUTOUT

26Source: RBAnalize, Raiffeisen istraživanja, br. 39, listopad 2010., str. 13

CROATIA – THE WAY OUTCROATIA – THE WAY OUTTechnological structure of the Technological structure of the

Croatian exports is deterioratingCroatian exports is deterioratingTechnological complexity of the

export products

2007.

High complexity 3,3%

Medium high complexity 24,9%

Medium low complexity 28,4%

Low complexity 43,4%

R&D investments and profits in Croatian companies

. Prema Prof Turčiću tvrtke kojeulažu:

• >1 % 4,7 %ostvaruju viši profit za

• 1 od – 2 % 8,2 %viši profit za

• >2 % - 12,5 %viši profit za

1987.

Highly sophisticated products 65,7%

Average sophisticated products 28,1%

Unfinished products 7,2%

: , , . 2/2010Izvori HGH Gospodarska kretanja br ,NVK 2008.Godišnje izvješće o konkurentnosti Hrvatske ,DSZ 1988.Statistički godišnjak Jugoslavije* . 5000 75% Prof Turčić je proveo istraživanje hrvatskih tvrtki koje predstavljaju ukupno angažiranog kapitala 29

71,8%

28,2%

35,3%

30 Source: Economist Intelligence Unit (2009)

Labor Force UtilizationLabor Force UtilizationParticipation Rates, Selected CountriesParticipation Rates, Selected Countries

25%

30%

35%

40%

45%

50%

55%

60%

65%

-3% -2% -1% 0% 1% 2% 3% 4% 5%

Labor Force Participation Rate, 2008

Change in Labor Force Participation Rate, 2004 to 2008

Germany

South Korea

Mexico

Slovenia

USA

Pakistan

Japan

Turkey

Slovakia

AustraliaDenmark

BrazilIndonesia

China

ArgentinaPhilippines

RussiaVietnam

India

Malaysia

Chile

Thailand

Croatia

Lithuania

TunisiaAlbania

BulgariaSouth Africa

EgyptLibya

Saudi Arabia

Colombia

Ghana

Cote d’Ivoire

Romania

KuwaitSingapore

Iceland

Macedonia

IrelandSpain

Latvia

CyprusEstonia

Ukraine

UK

Moldova

Nigeria

Israel

Norway

HungaryAustria

GreeceNetherlands

Italy

CanadaSweden

New Zealand

Finland

Other countriesEastern and Southern Europe

Czech Rep.

• With many of its less productive citizens outside of the active labor force, Croatian labor productivity is overstated versus peers

FrancePoland

CROATIA – Challenges in CROATIA – Challenges in 20102010

31


Increase employment rate and diminish unemployment, especially for young educated workforce

Increase the efficiency of state administration to minimize the government burden.

Encourage efficiency and innovation of export-oriented SME’s

Minimize effects of corruption. Promote life-long learning and

“education for entrepreneurship”.

CROATIA – CHALLENGES IN 2010CROATIA – CHALLENGES IN 2010Fostering Innovation: Policy Fostering Innovation: Policy ImplicationsImplications

Source: World Bank presentation: Gospodarska kretanja i kako ubrzati održivi oporavak u Hrvatskoj, Zagreb, 9.11.2010.

Encourage private R&D: Attract R&D-intensive FDI jointly with the

investment promotion agency/ministryImprove conditions for collaboration between university and industry by:

Simplifying legal requirements for cooperation Facilitating the commercialization of research

Enable the start-up of science based companies by:

Eliminating regulatory bottlenecks for the development of a venture capital industry

Foster restructuring of public R&D institutes by declining earmarking funding

32

CROATIA - CROATIA - Options Forward Options Forward Exploiting Untapped Growth Reserves Exploiting Untapped Growth Reserves in Croatiain Croatia

Safeguarding macroeconomic stability remains a precondition – which means

stable public finances

Increasing Employment Levels: Labor Market Reforms and Education

Raising Productivity: Allocative Efficiency and the Investment Climate

Deepening Trade Integration: FDI and the Supply of Exportable Goods

Fostering Innovation: Knowledge Commercialization and Use

33

Source: World Bank presentation: Gospodarska kretanja i kako ubrzati održivi oporavak u Hrvatskoj, Zagreb, 9.11.2010

“... in globalization The Fast Eat the Slow …”

(it is not the case that the Big eat the Small)

T. Friedman

TO UNDERSTAND .... TO STAY ALIVE

mladen vedris, university of zagreb, faculty of law, "economy: with or without knowledge?"

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