A Recipe to Attract R&D
“We believe that by implementing our recommendations, Hungary’s expenditure on R&D can be doubled,” says Dr. Lajos Reich, head of the Innovation Working Group of the American Chamber of Commerce (AmCham) in Hungary. On March 20, AmCham presented a position paper with recommendations how R&D and innovation, the pillars for national competitiveness, can be boosted.
Recently, CEE has been competing more and more with countries like India and China and the Latin-American region in terms of attracting R&D. “Legal and regulatory conditions concerning R&D have an important effect on competitiveness and on sustainable economic growth,” says Reich, who is also general manager of GE Healthcare’s R&D Center in Hungary. According to the AmCham position paper, GDP proportionate R&D expenditure could be even doubled if four major strategic directions are implemented by the government: competitive and diversified taxation; an efficient tender application system; predictable and flexible actions for the competitiveness of innovative SMEs; and an education system supporting R&D.
“We recommend the structural modification of tax incentives so that they decrease direct operational costs of R&D centers. Also pharmaceutical R&D, comprising more than 50% of the total spending, should further be supported. And last but not least, R&D definitions should be made unambiguous in the tax and tender application system,” says Dr. Csaba Márkus, R&D director of Deloitte and one of the renowned experts participating in the development of the paper.
“In order to make primary patent applications in Hungary attractive for companies, we recommend that registration time should be reduced to one to two years, which would diminish one of the uncertainty factors of R&D activities, especially in the case of young innovative SMEs,” adds Dr. Judit Budai, partner at Szecskay Law Firm.
According to Vilmos Benkő, AmCham Board member, the government “should support an education system that fosters creativity, an environment that pushes the dialogue of education and industry. Meanwhile, the companies should have the final word on how to spend their contributions for vocational training.”
Though Hungary used to be one of the key hubs for R&D before WWII (with 15 Nobel laureates this statement does not require an explanation), there is still a long way to go for the country in international comparison to obtain its historical position back. GDP proportionate R&D expenditures in Hungary and other CEE markets amount to an average of only slightly above 1%, where Germany or the US spends 2.5-3.5%. Slovenia is the only market in CEE where significantly more than 1% is spent on R&D (1.86%). It is one of the reasons Slovenia is recognized as the most competitive market in the CEE region by the recently published Ambrosetti survey, which was also covered on the GEforCEE blog.
The AmCham paper also recommends that the Hungarian government launches a consultation program to convince the 100 companies with the largest R&D budgets in the world to establish an R&D center in Hungary. This could be another way to quickly achieve substantive changes, because it is a thought provoking fact that the patent authority of the US, the largest market of innovative products, issued 146 patents in 2011, and half of them were invented by the employees of only seven large companies: GE, Ericsson, Nokia, Knorr-Bremse, Richter, Egis and Sanofi-Aventis.
AmCham Hungary’s Innovation Working Group was established in 2011 with the objective to shed light on the role R&D and innovation in the competitiveness of Hungary, to promote its contribution to the Hungarian GDP and to stimulate quick and efficient progress in areas of key significance.