Speech of Deputy Minister of Economic Development and Trade Mr. Yuriy Brovchenko to the round table “Development and Advancement of Science and Innovation Policies – the Role of the State” on topic “Supporting Innovation in Ukraine – Current Status and Legislative Support”
The “Ukraine 2020” Strategy for Sustainable Development points to the fact that Ukraine needs to become a state with a strong economy and advanced innovation in order to implement European standards of living and to enter the leading positions in the world.
In Ukraine, innovation has been defined for many years as a strategic direction of development. However, it have not yet become a tangible engine of economic development and industry.
According to the State Statistics Service, during the last 10 years only 18% of industrial enterprises carry out innovations. The overwhelming majority of them are large enterprises, which are capable of absorbing the costs and risks of innovation in a context of capital shortages, skilled labor and technology. Directly creating new and improving existing products/processes, only 4-5% of industrial enterprises are engaged.
Almost all innovative activity in the industry of Ukraine (95-100% of expenses) is financed by own funds of enterprises. Due to the lack of working capital and expensive loans, a significant part of Ukrainian industrial enterprises are not able to innovate and, as a result, have obsolete technologies, produce products that are not competitive in foreign markets.
In 2017, 759 enterprises were engaged in innovation activity in industry, the largest share of innovative enterprises was in the Kharkiv, Ternopil, Mykolayiv, Cherkassy, Kirovograd, Ivano-Frankivsk, Sumy, Zaporizhia regions and Kyiv, and the enterprise innovations spent UAH 9.1 billion, innovative products were sold by enterprises to UAH 17.7 billion, each fourth company implemented a new market output of UAH 4.5 billion as a result of innovation activity 8 enterprises have created new technologies, of which 59 have been transferred to other enterprises, in particular 2 – outside Ukraine.
The government has approved a number of programs to support innovation.
Thus, the decision of the Cabinet of Ministers of Ukraine approved the State Strategy for Regional Development for the period until 2020.
According to the Action Plan for 2018-2020, the National Strategy for Regional Development for the period up to 2020 is envisaged, in particular:
- assistance in the development of mechanisms and types of state aid to business entities to ensure the development of regions and support entrepreneurship, including the introduction of: micro-lending for the establishment and conduct of their own business; providing loans for the acquisition and implementation of innovative technologies;
- legislative regulation of the development and coordination of regional industrial development programs using state support of business entities for conducting research, technical, development and innovation activities in accordance with priorities.
The current legislation also allows the use of state support instruments for innovation. As an example, it is the creation of industrial parks. State support can be obtained for the construction of an industrial park at the expense of the State Regional Development Fund. In addition, you can get exemption from import duties on goods imported into Ukraine for the construction of industrial parks.
In 2018, at the expense of the State Regional Development Fund, one regional development project is being implemented for the development of the infrastructure of industrial parks (by the Cabinet of Ministers dated May 23, 2018, No. 372-p (as amended by the Cabinet of Ministers dated July 11, 2018, No. 479-p):
Project “Construction of water supply, drainage and storm water networks of the Novodnistrovsk industrial park” (Chernivtsi region), implementation years 2018-2019. The total financing of the project amounts to more than UAH 8 million. In 2018, the implementation of the project provides for the allocation of more than UAH 2 million from the special fund of the State Regional Development Fund and around UAH 2 million from the city budget as co-financing (the decision of the Novodnistrovsk City Council dated April 5, 2018, No. 90). The project is in the process of implementation.
The State Regional Development Fund web portal contains information on 10 more industrial parks projects planned for their implementation for 2018-2020, and it is anticipated that they will be funded by the State Regional Development Fund for more than UAH 100 million.
The development and implementation of innovative projects and start-ups requires significant investment and is quite risky.
The Ministry has developed and submitted to the Government for consideration a draft resolution of the Cabinet of Ministers of Ukraine “Some issues of state support for technological innovations for industrial development” for the implementation of the program “State support of technological innovations for the development of industry” (the budget provides funds in the amount of UAH 300 million)
The Ministry of Finance is also working on the creation and functioning of the State Fund to support the implementation of innovative projects, which foresees UAH 50 million in the State Budget of Ukraine for 2018.
- Program “Research, scientific and technical development, performance of works on state target programs and government orders, training of scientific personnel, financial support of the press, development of scientific infrastructure, scientific objects that constitute the national treasury, ensuring the activities of the State Fund for Fundamental research “- UAH 698 million;
- Program “Research, scientific and scientific-technical developments, carrying out of scientific events by the Taras Shevchenko Kyiv National University, financial support of scientific objects that make up the national treasures” – UAH 108 million;
- Program “Research, scientific and technical developments, carrying out of scientific events by the National Technical University of Ukraine” Igor Sikorsky Kiev Polytechnic Institute “, financial support of scientific objects that make up the national treasures” – UAH 30 million;
- Program “Research at the Antarctic station” Academician Vernadsky “- UAH 72 million.
For the interaction of representatives of the scientific community, executive authorities and the real economy in formulating and implementing a unified state policy in the field of scientific and scientific and technical activity, the National Council of Ukraine for Science and Technology Development, which is a permanent advisory and consultative body, that has been formed under the Cabinet of Ministers of Ukraine. The decree of the Cabinet of Ministers of Ukraine of August 9, 2017 No. 520-p approved the composition of the National Council for Science and Technology Development.
The Government approved the Concept for the Development of the Digital Economy and Society of Ukraine for 2018-2020 and approved the plan of measures for its realization, the main purpose of which is to ensure the implementation of the initiatives of the Digital Agenda Ukraine 2020 (Digital Strategy), which will help eliminate the barriers to digital transformation of Ukraine in the most promising areas by stimulating the economy and attracting investment, overcoming digital inequalities, deepening cooperation with the EU in the digital sphere and developing the innovation infrastructure of the country and a digital transformation.
Integration of Ukraine into the European Union’s Digital Market is one of the highest priorities for Ukraine, as it will overcome the barriers that exist on the way to the expansion of online services within the EU and to create common rules for the digital market of 28 countries of EU.
The EU-Ukraine Association Agreement, which entered into force a full year ago, stipulates that Ukraine must submit a detailed roadmap for the digital sector for the implementation and application of the relevant EU legal acts as defined in Appendix XVII-3 to the Agreement, covering legislative, institutional and other measures, deadlines for their implementation and responsible state authorities.
The feature of the Roadmap is that it will be a bilateral document, which should be approved by the decision of the EU-Ukraine bilateral authorities, which will include mutual obligations of the parties.
The issue of Ukraine’s integration into the digital market of the EU will be considered at the Third meeting of the EU-Ukraine Association for Trade, held on November 22-23, in Kyiv.
Approval of the Roadmap for Ukraine’s integration into the European Union’s Digital Market is one of the important points for fulfilling Ukraine’s international obligations through a consistent approximation of Ukrainian legislation to EU standards during 2018-2023 years. This will enable our state to become a full member of the European Union’s Digital Market, which will become one of the largest markets for online business.
Thus, the full use of digital technologies will contribute to Ukraine’s integration into the world economy, the global advancement of its own information resources and services, and the welfare of citizens.
According to the results of the final report of the Independent European Audit of the National Research and Innovation System of Ukraine, supported by the EU Horizon 2020 program, the following barriers to innovation development were identified:
1) Barriers “from the offer side”: unsatisfactory state of scientific infrastructures; the absence of incentives that would encourage public research organizations to engage in innovation-related activities;
2) “Demand side” barriers: insufficient level of interest in research and development by economic entities; insufficient awareness and opportunities for small and medium-sized enterprises in the use of innovation;
3) Barrier on the interface between “demand” and “supply”: insufficient experience of using public-private partnership in the field of innovations; the absence of official and effective channels for the transfer of information from enterprises to the expectations of the science and education sector;
4) Lack of identified priorities: given significant budget constraints, there is a need to focus state support on those areas where public research will be most effective in fostering innovation in the private sector. This is the best approach to guaranteeing the attraction of private funds to innovation.
Today, one of the priority directions of the Ministry’s activity is the preparation of proposals to ensure improvement of the legislation in the field of innovations. This is – support for innovation, technology start-ups, venture capital, clusters.
However, to start work on draft laws, it is necessary to adopt the Strategy of Ukraine’s Innovation Development for the period up to 2030. (the developer of which is the Ministry of Education and Science of Ukraine). The purpose of the Strategy is to build the innovation ecosystem of Ukraine to ensure the rapid and qualitative transformation of creative ideas into innovative products and services.
To this end, the Ministry of Economic Development and Trade created working groups on the drafting of the Laws of Ukraine “On the Development of Innovations”, “On Venture Capital” and “On Supporting Startups”. These working groups are currently working to bring innovation legislation to world standards. The Order of the Ministry of Economic Development and Trade of Ukraine dated November 2, 2018 No. 1607 established the State Organization “Agency for the Support of Public-Private Partnership” and approved its Statute.
We are open to dialogue and are ready to consider specific proposals regarding development of innovation activity in Ukraine.
Photo credit: Alexander Kozachenko
