EU SEEKS TO DOUBLE ICT RESEARCH AND INNOVATION FUNDING

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SUBJECT: EU SEEKS TO DOUBLE ICT RESEARCH AND INNOVATION FUNDING


1. (SBU) SUMMARY. The European Commission released a March 13
Communication calling for doubling funding for information and
communication technology (ICT) research and innovation and other
steps to boost ICT in Europe. "A Strategy for ICT R&D and
Innovation in Europe: Raising the Game" emphasizes that ICT provides
vital tools to promote economic recovery and address long-term
aging, environmental and energy concerns and lays out plans to make
the EU the world leader in ICT development by 2020. The Commission
notes that the EU lags the U.S. and Japan in the proportion of R&D
devoted to ICT and the economic value generated by ICT. The report
cites regulatory barriers to ICT business growth, fragmented
markets, disjointed R&D efforts and inadequate funding for the
shortcomings. The Commission calls specifically for doubling ICT
R&D investment by 2020, to be matched by member states. The
Communication also calls upon EU institutions and Member States to
coordinate efforts to overcome fragmentation of ICT R&D efforts and
markets, to raise the number of ICT "poles of excellence," and to
set the right conditions to grow new innovative ICT businesses
across Europe. The new strategy forms part of preparations for an
EU research and innovation plan as called for by the December
European Council, and underpins EU efforts to promote greater
emphasis on R&D and innovation as a critical factor to speed
recovery from the global economic crisis. END SUMMARY.

COMMISSION PROPOSES ICT RESEARCH AND INNOVATION STRATEGY
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2. (U) The European Commission released a Communication on March 13
calling for doubling funding for information and communication
technologies (ICT) research and innovation and other steps to boost
the ICT sector in Europe. The report follows upon a public
consultation, launched in September 2008, on an EU research and
innovation strategy for ICT, and responds to the December 2008
European Council call for an EU plan for innovation and research.
The Communication, "A Strategy for ICT R&D and Innovation in Europe:
Raising the Game," stresses the importance of deepening, rather than
cutting R&D support during the current economic crisis, and lays out
plans to make the EU the world leader in ICT development and use by

2020. The Communication underlines that Member States, EU
institutions and industry must pool resources and better coordinate
ICT research and innovation efforts to reach this goal.

EU LAGS OTHERS IN ICT RESEARCH
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3. (U) The Communication notes that in the EU, ICT represents 34
percent of the two trillion euro global ICT market, accounts for 12
million jobs and generates six percent of EU GDP. ICT R&D accounts
for a quarter of all private R&D spending, a third of all R&D
employment, and fifth of all patents in the EU. Nevertheless, the
EU ICT business sector spends less than half as much as its U.S.
counterpart on R&D spending. The EU also lags other OECD members in
the proportion of R&D devoted to ICT, who on average devote more
than 30 percent of total R&D to ICT. The Communication notes a
growing deficit of ICT skilled workers across the EU, resulting in
"several hundreds of thousands" of unfilled jobs. Value added by
the EU ICT sector is only 23 pecent of total value added, which
lags the U.S., Japan and advanced economies.


4. (U) The Communication cites a number of problems for the
shortcomings. It notes barriers to ICT business growth, wherein
sub-optimal conditions for SME access to markets, innovation and
finance, plus excessive regulatory burdens, prevent SMEs from
expanding and growing their market shares more rapidly. The
Communication highlights how fragmentation of EU ICT markets is also
a key limiting factor for SME growth and innovation. The EU's
failure to achieve a real internal market in telecoms, and to
standardize ICT regulation and IPR regimes, limit the ability of
firms to grow rapidly. The Communication calls for creation of a
Community patent to help remedy this situation. The lack of
collaboration between public procurement authorities and those
overseeing R&D and innovation results in many missed opportunities
for innovative products to flourish.


5. (U) In addition, the Communication outlines how Europe's ICT R&D
landscape remains fragmented, despite new efforts under the seventh
EU Framework Program for R&D (FP7). Member State ministries
continue to develop R&D, innovation and education policies in
isolation, without adequate cross-ministerial consultation. The
plethora of varied EU, Member State and intergovernmental R&D
funding mechanisms also lead to confusion for innovators.

THE SOLUTIONS - GREATER AND MORE COORDINATED ICT R&D INVESTMENT
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6. (U) In response to these shortcomings, the Commission says Europe
"needs to raise its game." The Commission calls for a systematic
ICT R&D strategy that mobilizes resources and stakeholders along
three paths: raising public and private ICT research and innovation;
prioritizing ICT research and innovation into key areas and reducing
fragmentation; and facilitating the emergence of new public and
private markets of ICT-based innovations.


7. (U) In specific terms, the Commission calls for doubling ICT R&D
investment by 2020, beginning with a boost in EU-level spending
under FP7 from 1.1 billion Euros in 2010 to 1.7 billion in 2013, to
be matched by Member States. This could be accompanied by direction
of additional regional/cohesion funding toward ICT innovation and
research. The Commission urges Member States to develop more
public-private partnerships, to boost public procurement of
innovative ICT products, and to explore pre-commercial procurement.

OVERCOMING FRAGMENTATION
--------------


8. (U) The Communication calls for a series of actions to better
coordinate its R&D and innovation policies and specialize its
resources. It urges Member States to work with EU institutions to
develop shared strategies and policies, to enhance the dialogue
within the National ICT Research Directors Forum and to work more
closely with ICT advisory groups. The Commission commits to
strengthen stakeholder groups and use instruments such as the ICT
Knowledge and Innovation Communities (KICs) to bring industries,
entrepreneurs and academics together. Member States and regions are
urged to redouble efforts to develop knowledge-based innovation
clusters, and increase sharing of R&D infrastructures for sectors
that require large investments, such as nanotechnology and
high-performance computing.

FACILITATING MARKETS FOR INNOVATION
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9. (U) The Communication discusses ways to facilitate the emergence
of markets for innovation, so that the EU can "produce and
commercialize the equivalent of its share in the global ICT market."
The Commission calls for both general policy measures and targeted
procurement as means to create more favorable conditions for EU-wide
innovation markets. Member States and regions should promote closer
collaboration between innovation users and producers across the
public sector. Governments should ensure interoperability and work
harder to promote common standards, and the Commission will work to
revise the ICT standardization process.


10. (U) Also, the Commission plans to support a series of
substantial pilot projects to deploy innovation ICT products and
develop new pan-European ICT-based service infrastructures. Among
these may be projects to focus on innovative ICT solutions for
sustainable healthcare or for energy efficiency, as well as an
effort to develop an electronic identity management (eID)
infrastructure, to increase the trustworthiness of e-government and
e-commerce services.


11. (U) Finally, the Communication calls for simplification and
streamlining of R&D administrative procedures, to cut red tape and
allow for greater flexibility in program procedures. The Commission
notes it will expand international cooperation on the largest-scale
ICT challenges, such as the Future Internet and quantum computing.

CONCLUSION AND COMMENT
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12. (U) The Commission's new proposed ICT R&D and innovation
strategy projects that if fully adopted, by 2020 the EU will have:
doubled its private and public investment in ICT R&D, doubled
venture capital investment in high growth ICT SMEs, developed an
additional five ICT poles of world-class excellence, to make ICT
research careers more attractive to bridge the current skills gap;
grown new innovative ICT businesses so that one third of all ICT R&D
business expense comes from new firms; and ensured that the EU ICT
sector supplies at least the equivalent of its share in the global
market.


13. (SBU) The proposed strategy is part of a larger series of EU
initiatives to boost the EU's innovative capacity across sectors.
These were triggered by the seminal 2005 Aho report detailing the
EU's R&D and innovation shortcomings. The new ICT strategy is
designed to build on the EU i2010 ICT policy framework, the
broad-based EU innovation strategy and ICT-related initiatives under
the European Research Area framework. The effort will need approval
by the European Council, which is likely. It is unclear whether

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this and other EU innovation promotion initiatives will allow the EU
to overcome the persistent innovation gap remaining versus the U.S.,
and in any case, will take time to show measurable results.

MURRAY