Ewi-review 3 / January 2008

N°3 Combining Economy, Science and Innovation for a better society

Periodical of the Department of Economy, Science and Innovation | January 2008

Towards improvement

Flemish government

EWI 3 ENG.indd 1

03-01-2008 13:52:01

Content 23 44 66 88 11 11 12 12 18 18 20 20

Welcome Results What’s what Let us explain Foreword Explained From Europe Central theme

23 26 26 28 29 32 32

Central theme Central theme Interview with From Flanders

35 35 36 36 38 38 41 44 46 47 49 50

A number in close-up In the spotlight Policy in practice Policy Research Centres Focus on Innovation in action Column

Are we on the right track? Civil servants in the private sector: a contradiction in terms? The age of Schumpeter Science policy in Belgium: who does what? Government efficiency: the be-all and end-all? Time for slimmer government in Belgium? Belgian STI policy viewed from abroad Efficiency and effectiveness in the public sector: measure, analyse, improve e-FRISiency: an asset for Flanders RIA rules It’s all about transparency and costs Challenging the government… Ten paths to a more efficient and effective Flemish government The ß-index: a layman’s guide Attack on a botanic garden Earning a doctorate in Flanders The Policy Research Centre for R&D Indicators Can we settle for a bit less? Strengthening our innovative environment Light in the darkness

COLOPHON EWI-REVIEW:

ADDRESS OF THE EDITORIAL OFFICE:

PUBLISHED BY: EDITORS: EDITORIAL BOARD: CONTRIBUTORS TO THIS EDITION:

GUEST AUTHORS: LAYOUT AND PRINTING: LIABILITY:

Periodical on Economy, Science & Innovation – Volume 1, No. 3: EWI Review is a publication of the Flemish government’s Department of Economy, Science and Innovation (www.ewi-vlaanderen.be/review) Office for Policy Research and Foresight studies, Department of Economy, Science and Innovation, Koning Albert II-laan 35, box 10, B-1030 Brussels, Belgium. Tel.: +32 (0)2 553 59 80 - Fax: +32 (0)2 553 60 07 www.ewi-vlaanderen.be Veerle Lories Peter Spyns (General Editor), Emmelie Tindemans (Editor-in-Chief), Els Jacobs, Marjolein De Wit Pierre Verdoodt (Chair of the Editorial Board), Peter Bakema, Pascale Dengis, Bart Laethem, Tom Tournicourt, Els Vermander Peter Bakema, Ann Bourdeaud’hui, Pascale Dengis, Bart Dumolyn, Stijn Eeckhaut, Niko Geerts, Karen Haegemans, Bart Laethem, Veerle Lories, Kris Maison, Peter Spyns, Tom Vandenbogaerde, Geert Van Grootel, Pierre Verdoodt, Frank Vereecken, Peter Viaene Marc Callens, Koenraad Debackere, Kristof De Witte, Wim Moesen, Eric Stroobants, Koen Peeters Delfine Vande Moortele, www.newgoff.be EWI Review is published in both Dutch and English. Articles may only be reproduced with acknowledgement of the source and subject to the approval of the EWI Department. EWI, the editorial team and other contributors to this publication accept no liability for any consequences that might arise from the use of information included in it.

2

EWI 3 ENG.indd 2

03-01-2008 13:52:30

> Welcome

Are we on the right track? The last edition of EWI Review looked at foresight studies and prospective policy. Little did we know that there would be some major changes in store for EWI itself, with a new (acting) secretary-general and minister now in place. In the wake of these events, the issue of the division of tasks between the administration and ministerial offices has come to the fore. Even a recent OECD study on administration identifies this as a Belgian Achilles’ heel. The administrative reform - known in Flanders as Beter Bestuurlijk Beleid (Better Administrative Policy) - should in theory alleviate some of the problem and recent decisions by the Flemish government in response to the Flemish ombudsman’s report will help to consolidate the trend. For the central theme of the third EWI Review, we have chosen another topic dealt with by the same OECD study, namely government efficiency. It too crops up regularly in the media and elicits strong political and public opinion. Keen to examine the issue from various angles and avoid a one-sided sound-bite approach, we will examine, amongst other things, the proposals put forward by the Flemish administration itself on this subject (see p. 32). EWI too is moving in the right direction. With the new FRIS change programme (see p. 23), we are seeking to promote efficient decision-making on R&D. We also examine what factors influence the efficiency of the doctoral process (see p. 38) and look at efficiency monitoring for legislation (see p. 26). This issue also boasts the usual features, including an explanation of the ß-index (see p. 35) and the division of responsibilities in the field of science, technology and innovation in Belgium (see p. 8). Finally, we report on the sad story of the Botanic Garden (see p. 36) - an example of inefficient cooperation between different governments in a federal state - in the hope that the situation there will finally be resolved. In short, what we have for you is a varied issue with a topical central theme, which will hopefully make for exciting reading, and which comes with our very best wishes for the New Year. Please feel free to send us your reactions at: www.ewi-vlaanderen.be/reageer. Peter Spyns General Editor

3

EWI 3 ENG.indd 3

03-01-2008 13:52:33

> Results

Civil servants in the private sector: a contradiction in terms? DEFINING THE CUTTING EDGE IN REGENERATIVE MEDICINE

4

EWI 3 ENG.indd 4

03-01-2008 13:52:38

You’ve been a civil servant for over 15 years, dealing with the theory of innovation on a daily basis, but have never spent more than 120 minutes in a business environment. What do you do when an exchange programme comes along? You seize the chance with both hands, of course! Launched by the EWI Department in spring 2007, the programme aims to bring the civil service and business world closer together by allowing staff from each sector to spend a period of time in the other’s working environment. For me, a university spin-off company was the natural choice. As head of the Academic Policy Team, I help to develop the interface policy1 that encourages universities and university colleges to set up high-tech spin-offs. With my background in biomedical sciences, I was drawn to TiGenix nv. Founded in 2000 as a spin-off of Ghent University and K.U.Leuven, TiGenix will soon be marketing its first product, ChondroCelect - a permanent repair product for

cartilage defects of the knee, offering a beacon of hope for sportsmen and women with knee injuries.

living organism with its own individual dynamic. Hence the term ‘business ecosystems’, which is sometimes used.

TiGenix seemed happy to take part in the exchange programme and to have me work for them two days a week over a four-month period. I was assigned to the Business Development Unit and from day one there were a number of projects on the table with which I was involved. My main task was to collect and process strategic information, with business plan analyses, market forecasts, patent applications, strategic alliances and new technologies the daily fare. I’ve never spent so much time on internet research in my life!

By contrast, the timescales involved are long. The whole process of bringing new biotherapeutics to market is heavily regulated. Supervisory bodies such as the US Food and Drug Administration and the European Medicines Agency set the pace. A promising technology and successful clinical studies are only the start: cost-effective marketing involves yet more hard work.

What struck me most while I was there was how companies around the world contact and interact with one another on the lookout for deals and alliances. Activities shift constantly, some starting, others ending, in the pursuit of revenue and growth. In this respect, a sector such as biopharmaceuticals is like a

In conclusion, I would say that experiencing policy from the other end, as it were, is an absolute must for all policy-makers.

Veerle Lories Policy Support and Academic Policy Team

1 The aim of the interface policy is to ensure (rapid) throughflow to companies of knowledge developed at universities and university colleges. Spin-offs are located at the interface between research and business. They are a way of translating research findings into practical innovations (= research transfer).

5

EWI 3 ENG.indd 5

03-01-2008 13:52:40

> What’s what

The age of Schumpeter

6

EWI 3 ENG.indd 6

03-01-2008 13:52:43

Creative minds of all countries, unite!

Creative destruction, the idea developed by economist Joseph Schumpeter in the first half of the last century, has had a profound impact on the development of the world economy over recent decades. And in the future it could shape the behaviour of homo economicus more than ever before, especially regarding of sustainable development. Creative destruction Innovation underpins the development of our capitalist society. By a process of constant renewal, we create the economic growth underlying society’s prosperity. But as Schumpeter observed in the early 20th century: with innovation comes a kind of destruction. Antiquated things make way for newer, better ones. Progress and prosperity have their price. How should we approach tomorrow’s challenges, assuming that our society remains capitalist? What are the pros and cons of a philosophy that pushes our society forward regardless of the cost? What does it bring us? And what price are we prepared to pay for creative destruction in the future? Theorists and broad-minded economists may be able to square sustainable development with the logic behind creative destruction. The concept offers a host of possibilities for further economic development in a globalised society. But there are undoubtedly limitations too. How can creative destruction be translated into sustainable development? What is the outlook for the future? These things are worth thinking about. And not just in theory, but - following Schumpeter’s lead - in practical terms too. Sustainable economy “Successful investing is anticipating the anticipation of others,” wrote Keynes, another leading economist of

the last century. Anticipating based on the observation of trends and developments. Taking a step back, gathering knowledge, and then getting down to business; in short: developing a sustainable economy. An example. In recent years, failure to react promptly to the demand for less polluting products and production processes has caused major problems for big companies. Through the actions of legislators and consumers, the demand for ecologically sound products, in the automotive industry for instance, has increased sharply. Consequently, companies that use research and innovation to market new, environmentally friendly cars are squeezing their non-environmentally conscious competitors, who will disappear from the market unless they in turn implement a research and innovation policy that can stand up to the competition. This benefits both consumers and the environment. Moreover, events in the automotive industry are being paralleled in an increasing number of sectors. The whole Western economy is undergoing a revolution that could have far-reaching, and likely very positive, consequences for our society - assuming that the rest of the world follows suit.

knowledge and innovation can make our economy sustainable and efficient: these are guarantees for a better future. “Keep the fire alive, don’t stare at the ashes,” Jean Jaurès said. As a socialist, he may have been the political antithesis of Schumpeter, but he was also a man of vision.

Frank Vereecken Office for Policy Research and Foresight studies

Creative destruction is the key. Innovation. Technological developments allow us to address the sustainable development challenges facing our society with increasing efficiency, and Schumpeter’s philosophy has helped us to realise this fact in recent years. Sustainable development is not just a matter for policy-makers and does not have to be confined to a Keynesian top-down approach. Thanks to creative destruction, the notion of sustainable economy is gaining a place in our society. Growing environmental awareness in the business community and the realisation that research and development,

7

EWI 3 ENG.indd 7

03-01-2008 13:52:47

> Let us explain

Science policy in Belgium: who does what? Belgian Science and Technological Innovation (STI) policy is unparalleled in the European Union, with different governments responsible for different parts of this broad policy area. Which policy level should universities apply to for support for a scientific research project? And where can companies find help with developing an innovative idea? A snapshot of a complex landscape...

BELGIUM The Federal State

Figure 1: federal entities in Belgium (taken from2)

COMMUNITIES The Flemish Community

The French Community

The German-speaking Community

The Brussels-capital Region

The Wallon Region

REGIONS The Flemish Region

Source: Federal portal www.belgium.fgov.be

8

EWI 3 ENG.indd 8

03-01-2008 13:52:56

Responsibilities for scientific research in Belgium have - as a result of successive state reforms - been systematically transferred to the federated entities.3 Nowadays, most responsibility for STI lies with the communities and regions. This includes scientific research - both basic and applied - and technological innovation. Communities and regions The communities are responsible for scientific research in the field of education (including universities and institutes of higher education), science policy, culture, media, sport, youth, vocational training and matters relating to the individual such as health policy (prevention, care, health education) or assistance to persons (e.g. family policy, youth support, care for the elderly, …). This covers both research on these subjects and research conducted by organisations in the sector concerned. The regions are responsible for research relating to economic policy (economic support, industrial policy, innovation), energy policy (excepting the nuclear fuel cycle), public works, communication networks, environment and water policy, nature conservation, housing, transport, spatial planning, natural resources, town and country planning, development aid, agriculture, foreign trade and investment and some elements of employment policy. Communities and regions are also res-

ponsible for their own institutions in the STI domain, namely scientific institutions and public research organisations. Educational institutions are thus mainly funded via the communities, while support for company research and development is a regional responsibility. That means that the various universities and institutes of higher education in the bilingual Brussels-Capital Region receive support from either the Flemish or the French Community. By contrast, technology transfer and research valorisation from these institutions to local companies is regulated and supported by another authority: the Brussels-Capital Region. What about the federal government? As an exception to the general rule, the federal government remains responsible for a number of specific scientific fields and institutions, such as the National Botanic Garden4. In addition, it can organise scientific programmes to finance community or regional institutions. The collective research centres are also partly supported by the federal government. The federal level has also retained responsibility for virtually all the framework conditions applying to STI policy in the broad sense. This includes matters relating to standardisation; intellectual property rights; accreditation; social security contributions of researchers operating in Belgium; certification; labour regulations for researchers who move between

companies, (public) research institutions and authorities. Finally, the federal government can also offer support to university research teams in conducting scientific projects, usually as part of specific programmes. Policy implications As a result of all this, Belgium’s various governments each develop and implement their own STI policy. They do so within their own areas of responsibility, and using their own institutions and legal rules, independently of the other institutional players in the field. For instance, the federal government and each community government has its own minister or state secretary responsible for scientific research. Similarly, each regional government has a minister or state secretary responsible for technological innovation5. Each minister and government sets its own priorities for its own STI policy, the budget for which is submitted to the relevant parliament for approval. Each government has its own scientific research advisory body, which assists the parliament and/or government with policy preparation. Each government also has its own scientific institutions and/or research organisations, which may or may not operate in similar fields. Cooperation examined critically The Interministerial Commission for Science Policy (IMCWB) was set up

Figure 2: Distribution of R&D funding in Belgium (2006)

1% 22%

27%

Federal government French Community + Walloon Region

Flemish government Brussels-Capital Region

50%

9

EWI 3 ENG.indd 9

03-01-2008 13:52:57

to promote cooperation between the various entities in the field of scientific research. It brings together the federal government, the communities and the regions. At civil service level, the International Cooperation Commission (CIS) and the Federal Cooperation Commission (CFS) were set up in the early 1990s to provide forums for issues requiring a joint position, reporting or implementation at international or national policy level. Each commission consists of a number of thematic sub-commissions. One such is the CIS/COST, which coordinates Belgian participation in the international cooperation programme COST6. Note, however, that this is not an overarching participation by Belgium as a whole in a specific COST activity, but rather a form of participation whereby each government decides separately to take part in a specific COST activity, depending on the case and the level of potential interest. In short, the level of coordination, cooperation and joint priority-setting among the various institutional entities is extremely limited, and virtually no attempt is made at policy “orchestration”. Priorities and instruments are determined and implemented by a government within its field of competencies. The basic premises and philosophies may vary, and where there is cooperation it arises from the need for a common Belgian position or common Belgian reporting. Consequently it is more of a formal contrivance than an expression of genuine concerns, initiatives or pressing issues. That said, there are similarities between a number of instruments, measures, programmes and organisations associated with different governments. Conversely, there are also measures implemented by one government which its counterparts have not (or not yet) developed or for which there is little interest or need.

strong variations in policy focus: while Flanders earmarked €62.1 million, the French Community and Walloon Region together set aside €187.3 million. Total R&D funding for Belgium in 2006 was divided up between the different governments as follows (see Figure 2): Flemish Community/Flemish Region: 50.25%; federal government: 26.56%;

French Community: 12.73%, Walloon Region: 9.34%, Brussels-Capital Region: 1.12%; German-speaking Community: 0%.

Niko Geerts Office for Policy Research and Foresight studies

STI responsibilities in a nutshell The communities are responsible for: - scientific research; - the various funding channels for their universities and institutes of higher education; - the international scientific cooperation of their institutions; - cataloguing and reporting scientific potential; - raising awareness of and promoting science among the general public; - research into the ethical issues associated with specific aspects of science; - scientific institutions and knowledge organisations at community level; - international scientific activities. The regions are responsible for: - transfer of scientific and technical research; - basic technological, industrial and economic oriented research; - encouragement, dissemination, transfer and application of technology and innovation in the broad sense (including development of prototypes, new products and production processes); - the (strategic) research institutions located on their territory, including research and public service activities. The federal government is responsible for: - the scientific research needed to carry out its own responsibilities, including scientific research conducted in accordance with international and supranational agreements. This is achieved through targeted programmes (on space, the information society, sustainable development, etc.); - scientific research in a few specifically defined fields, such as research into nuclear energy and space travel in the context of international programmes; - activities in areas falling within the remit of the communities or regions and which are related to either an international agreement or activities/ programmes that exceed the scope of a single community or region; - activities requiring homogeneous implementation at national level or of international importance for the country (in collaboration with the communities and regions); - maintaining an up-to-date inventory of national scientific potential; - popularisation of the areas of science falling within the federal government’s remit; - federal scientific institutions.

Let the figures do the talking In 2006, the R&D budget for all of Belgium’s governments combined was €1,929.9 million. In absolute terms, “Higher Education” took the biggest share of this €1.9 billion, with a budget of almost €460 million, followed by “Action programmes and organic systems for R&D”, which accounted for €321.4 million. This latter figure illustrates the

2 M. Cincera et al., Belgian Report on Science, Technology and Innovation, Part I, 2001, DWTC, p. 142 3 More particularly, the communities and regions first acquired a degree of responsibility for (applied) scientific research under Article 6a of the special law on institutional reform (BWHI) of 8 August 1980. In 1988, the division of powers was altered (partly due to the transfer of responsibility for education to the communities). In 1993, this was revised once again under the Saint Michael agreements. 4 See also p. 36 of this issue 5 For some time now, the same minister has been responsible at both regional and community level. 6 European Co-operation in the field of Scientific and Technical Research. This is the longest running joint European R&D programme (launched in 1971).

10

EWI 3 ENG.indd 10

03-01-2008 13:52:58

> Central theme: Foreword

Government efficiency: the be-all and end-all? Government efficiency is like the Loch Ness monster: it pops up regularly, generates a lot of discussion, there are proposals to study it and even attempts to ‘capture’ it. A popular dictionary defines efficiency as follows: “achieving the greatest possible effect or result by using or exploiting a given force, medium or condition, especially the rational application of economic principles in business”. This immediately raises the question: what effect does a government aim to achieve? After all, governments do not have the same objectives as companies… We therefore need a different yardstick for measuring government efficiency. One effect often cited as a must for any government is public satisfaction. Unlike a company, which can focus on target groups and submarkets, a government is supposed to serve all of its citizens. The objectives of a government are determined by politicians. If politicians decide and pass laws to the effect that an administration must be a mirror of society and must therefore provide employment for its less privileged members (known as ‘social employment’), this becomes an effect to be achieved. This is easy enough to measure, and something at which a civil service can be very efficient. Obviously, such a goal must not undermine its ability to meet other objectives. Policy-makers therefore need to think carefully about which tasks and objectives they choose to assign to the public services. Is it the task of a public

body such as the post office to strengthen the social fabric? Should a postman be given time to chat with lonesome elderly? What about specific community cohesion schemes such as ‘barbecue vouchers? Political choices determine where the money (of which there is usually a dearth) goes.

tiatives being taken by the College van Ambtenaren-Generaal (Board of Senior Civil Officials) in this area (p. 32).

How ‘heavy’ a government is depends not just on the number of civil servants but also on the total amount of charges and contributions imposed by the government (known as ‘government ratio’). The important question is what the government does with this revenue. It has been said that “one euro acquired in tax reduces the private economy by more than one euro”7, so effective management and careful use of monies is key.

Veerle Lories Acting Secretary-General of the EWI Department

Ministerial offices (also called ‘cabinets’) are another relevant factor, as was very clearly highlighted in a recent OECD study8. The principal question is how large a ministerial cabinet should be, and how it relates to the administration. A parliamentary discussion and further consultation based on mutual respect for each other’s roles are needed here. In this issue, we examine government efficiency from various angles: ways of measuring it (p. 20), Belgium’s government ratio (p. 12), an interview with Elsa Pilichowski about the much-discussed OECD study (p. 28), and finally the ini-

7 J. Albrecht, Blijft de Andere Overheid volslank in Nederland Gidsland?, Itinera Institute Nota 2007/9, p. 1 -6. 8 OECD Reviews of Human Resource Management in Government: Belgium: Brussels-Capital Region, Federal Government, Flemish Government, French Community and Walloon Region, OECD, Paris, 13/07/2007, 134 p.

11

EWI 3 ENG.indd 11

03-01-2008 13:52:58

> Central theme: Explained

Time for a slimmer 9 government in Belgium? The early 21st is a time of major global transformations. Globalisation and climate change are familiar topics; less discussed is the changing size of government. Figure 3 illustrates the trend towards public sector expansion in the OECD countries, the eurozone and Belgium from 1988. Around 2000 the collective tax burden stagnated and has since even fallen slightly. Belgium seems to deviate from this average pattern.

12

EWI 3 ENG.indd 12

03-01-2008 13:53:04

Collective tax in the broad

55

OECD eurozon Belgium

Tax burden as % of GDP

50

45

40

35

06

05

07 20

20

03

04

20

20

20

01

00

99

02 20

20

20

97

98

19

19

96

19

95

19

94

19

92

93

19

19

91

19

90

19

89

19

19

19

88

30

Figure 3: Collective tax burden (OECD)

Is there such a thing as an optimal government size? Is the current level of expenditure above or below the norm? These are the questions we address below. How do we measure government size? Government ratio is measured using a variety of statistics. One standard concept is the collective tax burden, i.e. total tax receipts for all governments, plus social security contributions. This means the direct and indirect tax collected by the federal, regional and local governments plus employer and employee contributions. These contributions are expressed as a percentage of gross domestic product (GDP). A broad definition of the collective tax burden also factors in the government’s non-fiscal receipts. Typical examples of these are profits and dividends from public companies, charges (user fees) for public utilities, access fees, fines, etc.; these usually account for 3-5% of GDP. Assuming that government budgets are in overall balance, the collective tax burden in the broad sense roughly reflects the collective expenditure ratio. However, if the government tolerates shortfalls, the expenditure ratio will exceed the collective tax burden in the broad sense.

In the absence of a government, lawlessness, insecurity and instability prevail. Even a small, weak government can raise prosperity significantly by protecting property rights and introducing public order. Such basic law and order allows the economy to grow much faster. Prosperous societies favour increased government involvement. Citizens demand an effective healthcare system, an advanced education system and a generous pension system. A healthy and well educated population allows the economy to grow even faster. Unfortunately, economic theory predicts that the collective tax burden imposed by the government will become too heavy, so that money which could be more effectively used in the public sector is siphoned off into the public coffers. From that point on, high taxes hold back the growth of GDP. To

achieve higher economic growth, the government must diet. Family size Optimal government size, i.e. that which maximises economic growth, is not the same for each country. Indeed, the optimal tax burden is affected by a range of factors. Chief among these is public preference. In Scandinavian countries, for example, the average inhabitant favours big government. Other nations, such as the Mediterranean countries, seem satisfied with a less extensive network of government services. In this connection, we can observe a striking correlation between family size and public preference regarding government size. Within a society, citizens

Growth rated bbp

G*

Is there an optimal size? That there is an optimal government size can be seen from the ‘Armey curve’ (Figure 4). This assumes a non-linear relationship between the size of government and economic performance.

G0

T*

Figure 4: The Armey curve

EWI 3 ENG.indd 13

Tax burden as % bbp

13

03-01-2008 13:53:06

Relationship between family size and government 70

y = -15.735x + 84.691 R2 = 0.3546

60 Government ratio (1999)

Denmark Belgium

50 Netherlands 40

Spain

30 20 10 0 2

2.2

2.4

2.6

2.8

3

3.2

3.4

Family size (1999) Figure 5: Relationship between family size and government ratio (Eurostat)

are subject to various micro-economic risks: medical (illness, disability), social (theft, violence), economic (individual unemployment, bankruptcy) and lifecycle (birth, old age) problems. Each of these risks is offset to a greater or lesser degree by a family safety net. The stronger this safety net is, the less the government is likely to have to intervene in times of need. Family size in the OECD countries has fallen steadily over recent decades. In 1850 the number of children in the average European family was just under 5, while by 1999 this had fallen to a mere 2.5. The ‘anorexic family’ was born. A still largely undocumented empirical observation is the negative correlation between family size and the overall size of the public sector. The negative link between government expenditure and family size is illustrated graphically in Figure 5. Family size is a significant explanatory variable for government size. Others include: trust in government, openness and GDP per capita. Family

size can also be seen as an indicator of a society’s implicit preference as regards level of government interference.

lies are becoming smaller, they require a big public sector safety net. An open economy

To explain this empirical observation, we need to start by considering the tasks of government. Firstly, the anorexic family requires that governments take on additional tasks. Where once children and extended family looked after the youngest and oldest family members, this is now often done by crèches and care homes, which are subsidised with public funds. Similarly, other tasks once performed by families themselves are now outsourced to the welfare state. The public sector has expanded to accommodate these new responsibilities. Meanwhile, young couples are no longer worried about their old age: they know that they will receive specialist support in the event of unemployment, sickness and old age. This causality cuts both ways, of course. Because the public sector is expanding to offer a large safety net of specialist care, families can afford to be smaller. Conversely, because fami-

There are other factors that affect optimal government intervention. For example, there are macro-economic as well as micro-economic risks. In our globalised economy, export and import account for an increasing proportion of GDP. For Belgium, this trend is very marked. In an open economy such as ours, the effectiveness of government policy seems to be diminishing steadily, not least because multiplier effects are flowing abroad. In a groundbreaking article, Rodrik10 has suggested that countries with more open economies have bigger public sectors. Small, extremely open economies such as Austria, the Netherlands, Norway and Belgium have the world’s largest ratios of public expenditure to GDP. Figure 6, which analyses an international sample of 66 countries, bears out this finding.

Old Family ‘Anorexic’ Family

14

EWI 3 ENG.indd 14

03-01-2008 13:53:07

Government as buffer against external shocks

40 Government share in GDP

35 30 25 Denmark

20

Netherlands

Spain

15

Belgium

10 y = 0,057x + 14,174

5

R2 = 0,2114 0 0

20

40

60

80

100

120

140

160

180

200

Government as percentage Figure 6: Government as buffer in an open economy (Penn World tabel, data 2004)

An explanation for this correlation can be found in the risk-avoidance behaviour of society. Citizens demand (and get) a bigger public sector as compensation for the greater external risks associated with an open economy. In the globalised world economy, the overall volatility of economic production will be less than the volatility of production in an individual country, due to the law of large numbers. However, when a country or region enters the world economy, the search begins for the comparative advantages in which the country will specialise. As a result, the production structure in an open economy will be less diverse. Because the rest of the world cannot offset shocks in a particular country, a stabler world economy means nothing to that country’s citizens: all that matters is the stability of the specialised domestic production. Higher public expenditure, subsidised by compulsory social security, can offer a way of stabilising consumption. In this way, public spending provides a form of social security for societies subject to external shocks

and mitigates risk. A typical example of this is unemployment benefit. GDP per capita According to prevailing economic literature on endogenous growth theory, the third and final adjustment factor is GDP per capita. It is assumed that countries with a higher GDP per head of population also display greater productive and allocative efficiency, due to factors such as a better educated work force, greater capital intensity and technological progress. In search of optimal government size To work out the optimal level of government intervention, we will compare the collective tax burden and GDP growth of 23 similar OECD countries. We have opted for a long-term perspective (average values over the period 1988-2004) to eliminate any short-term fluctuations. Using statistical analyses, we have adjusted for differences in preference

on government intervention (family size); the need for economic stabilisation (openness); and the country’s productivity level. According to this benchmark, the Belgian public sector is structurally, and over the long term, 3.9% too big (see Table 1). There are a few things to note at this juncture. Our standard is based on the performance of an economy in terms of growth, not in terms of the redistribution of income and wealth, which is nonetheless a laudable social objective. Also, we are working with statistical data on the collective tax burden in the broad sense of the term, including non-fiscal receipts. For some countries, such as Norway, this figure could be pushed up much higher due to profits from natural gas and oil production. Towards a viable benchmark By taking things a few steps further, we can use the above findings to devise a concrete policy for Belgium. For

Table 1: Optimal government ratio (De Witte and Moesen, 2007, p. 15)

Belgium

Long-term collective tax* (1988-2004) (1)

Long-term benchmark size (2)

Change in long-term size (3) = (2)-(1)

Collective tax burden in 2005** (4)

Change in size (5) = (2)-(4)

47.593 %

43.660 %

-3.933 %

46.400 %

-2.740 %

* collective tax burden in the broad sense ** collective tax burden in the standard sense

15

EWI 3 ENG.indd 15

03-01-2008 13:53:10

Vocabulary multiplier effect: refers to the fact that, say, a rise in one of the autonomous components of total demand can lead to an even greater increase in economic activity. comparative advantage: this theory (attributed to Ricardo) states that a country must specialise in goods/services that it can produce more cheaply than other countries. ceteris paribus: other factors remaining the same or unchanged (often used when studying the effect of one variable while keeping the others unchanged). endogenous growth: endogenous growth is growth from the inside outside due to technical developments/innovations, etc. allocative efficiency: related to the allocation of (scarce) products or services among users, the allocation of available production factors among all institutions and the choice of an optimal set of outputs produced in the most efficient way for society. Research into allocative efficiency looks at whether scarce resources are being fairly allocated among institutions that perform public tasks or among citizens who may use the service.

instance, it is inaccurate to compare the structural benchmark of 43.7% (column 2) with the actual tax burden of 47.6% (column 1), since the latter is the average for the whole period 1988-2004. It makes more sense to use the collective tax burden from a recent year, e.g. 2005, as a stepping stone towards a concrete policy. For Belgium, the collective tax burden (as broadly defined) was 49.1%. Compared with the structural benchmark of 43.7%, this implies a reduction of 5.4% of GDP. However, it is questionable whether this could be achieved in a single legislature. Let us therefore take a ‘milder’ reference: the collective tax burden in the standard sense, excluding non-fiscal receipts. In this scenario, Belgium would have to reduce its government size by 2.74% of GDP. What are the policy implications? Under previous legislatures, the golden standard in public finances was achieving a balanced budget, rather than controlling spending. The advantage of this was a steady fall in interest rates, generating an ‘interest bonus’ of approximately 4% of GDP over the period 1999-2007. However, achieving a technically balanced budget meant frequent recourse to budgetary alchemy, some of the less flattering examples of which were: the transfer of pension funds based on a capitalisation system from (semi-)public institutions; the sale of government buildings; and the securitisation of tax arrears. That said, public finances were at least prevented from slumping into substantial deficit, which was not the case in some EU countries.

Today, it makes sense to agree on an explicit norm for expenditure in the next legislature. A year-on-year rise in spending of 2.58% is both defensible and feasible, for a number of reasons: - This percentage is based on an analysis which says that the ‘optimal’ size of the Belgian government is calculated from the perspective of economic growth. Within four years, the expenditure ratio will have fallen by 2.7%: exactly the level by which the current expenditure level exceeds the theoretical norm in a ‘mild’ scenario. - It will keep the real policy space intact (the Planning Bureau puts inflation at an average of 1.9% a year), whilst also offering some space for additional policy initiatives (around 1/3 of the predicted real growth of 2.1% a year). Obviously, new projects and activities can also be financed by reformulating existing expenditure. - Assuming (i) that a balanced budget is taken as the basis and (ii) a policy is pursued in which the overall tax burden remains constant, the public finances will display a surplus of 2.7% at the end of the legislature. If the collective tax burden remains constant, the progressivity of direct taxation, in this case income tax, can be neutralised (known as ‘bracket creep’). Naturally, internal shifts between direct and indirect taxation and social security contributions will also remain possible. Finally, we would like to correct two misunderstandings. - A reduction in expenditure ratio is often associated with a drop in absolute expenditure. This is incorrect. For the

expenditure ratio to fall, it is enough for nominal expenditure (the numerator) to rise less quickly than nominal growth of GDP (the denominator). - In addition, it is often intuitively assumed that a fall in the expenditure ratio will automatically lead to a decline in the quality of public services. This is also erroneous. In the proposed scenario, an adjustment has been made for inflation and a (small) part of real growth transferred to expenditure. Real policy potential therefore remains intact, and could even increase slightly. Moreover, various studies have shown that Belgium’s government machinery could make significant efficiency gains. In other words, it is possible to maintain the same level of service quality while reducing nominal public spending.

Wim Moesen and Kristof De Witte K.U.Leuven, Faculty of Economics and Applied Economics Naamsestraat 69, 3000 Leuven ([email protected])

(edited by Peter Spyns, Office for Policy Research and Foresight studies 11)

16

EWI 3 ENG.indd 16

03-01-2008 13:53:10

9 The underlying theoretical and empirical model is set out in Kristof De Witte and Wim Moesen, Sizing the Government, Department of Economics, K.U.Leuven, June 2007, mimeo, 17 p 10 Dani Rodrik, (1998), Why Do More Open Economies Have Bigger Governments?, Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October. (http://ideas.repec.org/a/ucp/jpolec/ v106y1998i5p997-1032.html) 11 The original text (in Dutch) can be found at: http://workforall.net/Moesen-optimale-overheids-uitgavenquote.pdf

17

EWI 3 ENG.indd 17

03-01-2008 13:53:15

> Central theme: From Europe

Belgian STI policy viewed from abroad

18

EWI 3 ENG.indd 18

03-01-2008 13:53:17

Belgium risks missing out on opportunities in the increasingly globalised world of Science, Technology and Innovation (STI) due to a lack of joint vision and objectives. This stark warning comes courtesy of the Peer Review12 on STI policy in Belgium.

The Peer Review is part of the Open Method of Coordination (OMC) of the EU’s Scientific and Technical Research Committee (CREST). Under the OMC, the Member States formulate joint objectives and activities on STI policy, through methods such as comparison and mutual learning. Joint action plans are developed for meeting these objectives and there is reporting on policy progress and outcomes. Recommendations Four experts from Spain, Germany, Switzerland and Denmark - the ‘peers’ - examined the STI system in Belgium, interviewing various stakeholders in the process. The aim of the exercise was to formulate recommendations for making policy mechanisms in Belgium more efficient, rather than evaluate the policy mechanisms in place. The report highlights the need to focus on human capital (more and better trained researchers) and to encourage the transfer of research and technology. Policy development mechanisms are the other major area in which attention is required and challenges need to be addressed. In a global world, we need to examine how decisions taken by the different entities of Belgium’s innovation system hang together. The peers believe that Belgium needs to move the globalisation of STI up the policy agenda in order to fully exploit the challenges and opportunities associated with it. Without wanting to undermine the institutional structure and the division of responsibilities for STI13, they suggest that joint objectives should be set at Belgian level, for which all governments

are responsible. To further optimise the policy mix and bring it into line with the international framework, a common vision should be developed. This could be supported by knowledge exchange platforms. The peers also recommend devoting more attention to the evaluation of policy mechanisms. This should not be limited to the traditional ex-post assessments. Interim evaluations of the policy measures are needed so that adjustments can be made in good time. Transparency, international openness and mutual learning are components that could help to strengthen these evaluations. In addition, we need to move away from the traditional analysis of a measure’s direct output - such as the number of publications in international journals as the direct result of a research programme - towards an analysis of effects and long-term impact, such as the influence on Flanders’ economic fabric. Merit Generally speaking, the merit of this report is the fact that it makes a number of recommendations that look beyond Belgium’s institutional structure. However, this is also one of its downsides as it means that some of its recommendations are practically and legally impossible to implement, making them nothing more than a theoretical exercise. The document will be helpful for further policy developments at Flemish government level and also for developing initiatives with other Belgian governments aimed at fostering mutual cooperation or even the coordination of policy initiatives and instruments. It identifies a number

of weaknesses in our current system and highlights the challenges facing us now and in the future.

Bart Laethem Entrepreneurship, Science Popularisation and International Cooperation Team

The globalised Science, Technology and Innovation (STI) landscape As the boundaries of scientific research shift, conducting such research is becoming increasingly complex. Experts from different scientific disciplines are increasingly having to pool their forces to find solutions to problems or challenges. Moreover, they are often working on cross-border issues such as climate and energy. In response to these changes, the research world is increasingly organising itself into international networks and cooperation groupings. The European Union strongly encourages and supports this through its development of the European Research Area. 12 A peer review is an assessment/evaluation performed by individuals with the same expertise, background and/or occupation. 13 See also p. 8 of this issue

19

EWI 3 ENG.indd 19

03-01-2008 13:53:19

Efficiency and effectiveness in the public sector: measure, analyse, improve

20

EWI 3 ENG.indd 20

03-01-2008 13:53:21

> Central theme: Government efficiency

Studies are regularly published which examine the Flemish government’s performance from a national and/or international perspective. A recent example is the OECD report on the structure and working of Belgium’s governments (OECD, 2007). Compared with Belgium’s other governments, it rates the Flemish government relatively highly. A study on the global productivity of European governments (Moesen, 2004) came to the same conclusion. However, compared with Europe’s top performers, there is a 12-15% potential for improvement.

Findings such as these are guaranteed to create great press and public attention. A trimming down of the civil service is often advocated as a response. Supporters point to immediate gains in efficiency, while opponents fear a decline in quality. However, the precise meaning of the term ‘public sector’ is not always clear. What exactly do ‘efficiency’ and ‘effectiveness’ mean? How can they be measured? And how can this information and further research contribute to better performance? Public sector defined The concept ‘public sector’ is often used as a blanket term. Kuhry and Van der Torre (2002) make a distinction between the public sector in legal, financial and functional terms. - In the legal sense, the public sector comprises the government and organisations governed by public law. - The public sector in the financial sense also includes private organisations that are mainly financed by the public means, such as non-profit organisations in the education and healthcare sectors. - Finally, there is the public sector in the functional sense, the so-called ‘quaternary sector’: all organisations in the fields of public administration, social security, law and order, educa-

M

means/ resources

tion, healthcare and social and cultural services, regardless of legal status and financing source. The distinction between public and private sector is sometimes vague: is a non-profit organisation part of the government or not? How private is an education system if the bulk of its costs are borne by the government? A government operates at three levels: execution, guidance and condition-shaping (Kuhry and Van der Torre, 2002). In its executive role, the government is directly involved in the provision of services to the public. Its second role is to guide, monitor and subsidise executing agencies. Thirdly, the government also operates in a condition-shaping capacity. Efficiency and effectiveness When considering public sector performance, a distinction is usually made between resources deployed (input, means), activities (throughput, processes), performance (output, products) and effects (outcome, consequences) (see Figure 7). Public sector performance can be related either to input to achieve the output, or alternatively to the effects achieved as a result of the output. The relationship

A

activities

P

performance

EFFICIENCY

between input and output indicates the efficiency. The relationship between output and effects achieved indicates the effectiveness of the production process. Efficiency is the measure of resources used (personnel, capital, material) to achieve a particular performance (product, service). An example would be the number of man hours needed to maintain 1 km of cycle paths. Efficiency is a relative concept: a performance is called efficient if it uses few resources as measured against a certain benchmark, such as a standard or a similar organisation. The best organisations act as a kind of reference: a benchmark on which less efficient organisations can judge themselves. Effectiveness indicates whether or not a particular output achieves a particular effect or goal. An example would be carrying out maintenance work on cycle paths (output) in order to prevent accidents (effects). In this context, a distinction should be made between direct and indirect effects or objectives. A direct effect relates to and is measurable against a concrete end product. An example of a direct objective in the education sector would be gaining a school leaving certificate. Indirect effects refer to deeper, underlying social objectives.

E

effects

EFFECTIVENESS

Figure 7: The production process at government institutions14

21

EWI 3 ENG.indd 21

03-01-2008 13:53:22

Examples in the education sector would be empowering citizens and providing a well educated workforce. Measure, analyse, improve Measuring public sector efficiency is no easy task, not least because the value of a performance cannot usually be expressed in monetary terms, as it can in the private sector. For that reason, we generally use what are known as ‘physical production indicators’. Examples in an education context would be the certificates gained, the number of pupils and the number of lessons given. However, when it comes to purely collective products such as public administration, it is not clear what the performance provision actually entails. This makes it difficult to construct appropriate production indicators. An alternative method is to calculate the ratio between resources deployed for public administration and the total production of the country or region. What complicates the measurement is that performance indictors must be properly adjusted for quality differences. Otherwise, a smaller group size in an educational setting, for example, would lead to a drop in the performance measured, or better educated teachers to a rise in cost! Often, such an adjustment is not possible. In this case, a solution is to include a series of quality measures alongside the non-adjusted performance indicators. These quality measures may be both objective, e.g. the percentage of buses that run on time, and subjective, e.g. satisfaction among bus users. Although difficult, measuring the efficiency and effectiveness of specific public services is important (Israëls e.a., 2001). In the private sector, market

forces work to ensure efficiency gains, but in the public sector there is much less market pressure to achieve optimal performance. For example, key goals in the public sector are often different from those in the market sector and the means of achieving them more tightly regulated. A company’s aim is profit; a business unit that fails to make enough profit can be closed down. By contrast, public bodies often have no choice about whether or not to supply particular services; their primary concern is achieving specific social and/or statutory goals. Whether this entails (excessively) high costs can seem less important. Moreover, with some public sector products there is no freedom of choice whatsoever. If you want a new passport, you have to go to your own municipal offices, regardless of how cheap or expensive the passport is or how long it takes to issue.

ween a) resources and performance and b) performance and effects. Identifying best practices and the factors underlying efficiency differences between government institutions can lead to efficiency gains in a particular government sector.

Measuring (in)efficiency and (in)effectiveness can help to build up a better picture of the relationship bet-

Marc Callens Research Centre of the Flemish Government

In some cases, the legislature has already taken action on efficiency and effectiveness issues in individual sectors. For instance, the Flemish government sets minimum standards for quality assurance in welfare facilities, covering such aspects as user focus, social acceptability and effectiveness and efficiency. However, as yet there is still no legal basis for a systematic and periodic measurement and inspection framework for efficiency and effectiveness in the public sector.

Sources • Bouckaert, G. and T. Auwers (1999), Prestaties meten in de overheid, Bruges: Die Keure. • Israels, E., A. Matheeuwsen, M. Roelofs and F. Roijackers (2001), Efficiëntie meten bij de overheid, Openbaar bestuur, 2001-11, pp. 25-28. • Kuhry, B. and A. van der Torre (2002), De vierde sector, The Hague: Sociaal-Cultureel Planbureau. • Moesen (2004), De kwaliteit van de overheid te lande en in euroland, K.U.Leuven. • OECD (2007), OECD Reviews of Human Resource Management in Government: Belgium: Brussels-Capital Region, Federal Government, Flemish Government, French Community and Walloon Region, OECD, Paris, 13/07/2007, 134 p. 14 Bouckaert, G. and T. Auwers (1999), Prestaties meten in de overheid, Bruges: Die Keure, p.17

22

EWI 3 ENG.indd 22

03-01-2008 13:53:24

> Central theme: Government efficiency

e-FRISiency: an asset for Flanders The knowledge economy is one of the cornerstones of our society. Our great economic prosperity and development is derived for a large part from technical knowledge. Indeed, technical knowledge is increasingly coming to dominate the three traditional production factors of labour, nature and capital. Knowledge unlocks innovation, which in turns spawns new products or services, thereby enabling further economic growth. That is why encouraging research and development - or R&D for short - is so essential.

measurement against critical performance indicators (CPIs). IWETO weighed in the balance

Boosting knowledge, creating prosperity

It also explains one of the planks of the EU’s 2000 Lisbon Strategy: to ensure that Europe is the most knowledge intensive economy in the world by 2010. Encouraging R&D is therefore high on both the national and international agenda. But this comes at a price, of course. In 2005, in Flanders alone, companies, organisations and the government invested over €3.6 billion in R&D, 2.1% of gross domestic product15. With so much money involved, the key priority is that it should be used efficiently. In this context, the efficiency and effectiveness of the whole R&D value chain is of relevance: from policy choices and investment decisions, through administrative processes and research to exploitation of results and

An important part of streamlining the R&D value chain is the management of research information: on projects, researchers, research institutions, results such as publications and patents, expertise, equipment, financing sources and so on. Having accurate, up-to-date research information is critical at every stage of the R&D value chain: when making policy decisions, planning and conducting research, implementing and optimising administrative processes and measuring and evaluating research findings. The Flemish government and Flemish universities were aware of the importance of research information as far back as the early 1980s and set up the Inventory of Scientific and Technological Research in Flanders (IWETO). A that time, IWETO16 was the first research information system of its kind. Today, however, it no longer meets the standards expected of a modern research information platform: information is gathered retrospectively and only supplied at intervals, the quality has declined and the information is no

longer always up-to-date. Also, the information gathering process takes a lot of time and energy, as it is treated as a separate task at each of institutions involved in the project, and the scope of the information collected is limited: core data such as publications, patents and doctorates are not included. Lastly, IWETO does not exchange data with other information systems. Flanders Research Information Space Needing a new system for managing research information, EWI launched the Flanders Research Information Space programme (FRIS)17. The FRIS concept creates a virtual research information space covering all Flemish players in the field of economy, science and innovation. Within the space, research information can be stored and exchanged in a transparent and automated way. A key feature is that data can be collected at the point of creation: in the operational processes of data providers. For example, information on a research project can be found in the assessment process for a funding application. Collecting information at the operational process level offers major advantages. The data are accurate and up-to-date because they are being used in an operational process. Also, it is not necessary

23

EWI 3 ENG.indd 23

03-01-2008 13:53:29

to establish a parallel data gathering process, so data providers are spared a lot of administrative work. The three key concepts of the FRIS programme are simplicity, transparency and openness. The development of FRIS has three strategic goals:

data registration should enable citizens and the government to check where public R&D money has been spent. Each of these strategic objectives contributes to the central objective of greater research efficiency.

streamline the supply of statistical data, the main aim being to cut down on administrative work. The universities also want to use reporting as a full-blown policy instrument, which dovetails perfectly with the principles of the FRIS programme.

Opportunities Next steps

2. Administrative simplification By creating a highly efficient data environment, all desired information is entered once and can be reused instantly by all competent parties. This administrative simplification means that the budget for scientific research can be put to optimum use. It allows researchers to focus entirely on their area of expertise, namely conducting scientific research. A quick calculation of the combined wage costs of Flanders’ 20,000 or so researchers shows that each percentage of their working time spent on administrative formalities costs around €9.5 million: public money that could otherwise have been spent on research. The institutions where research is conducted are also keen to see the number of research information surveys reduced and the whole process streamlined. Each year, they must fulfil various reporting obligations towards their funders, mostly in connection with international obligations on research information (e.g. EuroSTAT18 and the OECD19). Different surveys often use different definitions or classifications, so that existing data cannot be re-used. 3. Measuring for better policy-making Better consolidation and aggregation of data will allow the government to develop more effective policy, evaluate it more accurately and adjust it more quickly. Scientific institutions need consolidated information in order to make appropriate research choices and use their resources efficiently. Transparent

There are a number of opportunities favouring implementation of the FRIS programme; indeed, the time is ripe for such an initiative. The technology for exchanging data between institutions is available (web services, service oriented architecture), and all Flemish universities use the European research information standard (CERIF, see inset), which makes it easy to collate data from various institutions and exchange data with other CERIF systems. There are also successful examples of information systems that operate on the principle of data exchange between players: the Crossroads Bank for Social Security (CBSS), the Flemish Crossroads Bank for Enterprises (VKBO) and the Flemish government’s data sharing platform (Magda). The Education Department also has a project in the pipeline to set up a Higher Education database along the same lines as the FRIS programme. As part of the review of annual reporting legislation for universities, an exercise is under way to simplify and

The first half of 2008 will see the launch of a new research portal, whose first service will be an upgraded version of IWETO whereby universities supply CERIF2006-compliant data based on a fully automated process. This new procedure will allow universities to supply data much more frequently than before, with no extra administrative work. This service is only the first part of the FRIS programme. Over the coming months and years, the research portal will roll out a range of new services as part of the research information space (see Figure 8). The possibilities are numerous: a white guide (who does what?), library of publications by a particular researcher (digital library), a service for updating and reusing researchers’ CVs and provision of information on patents, to name but a few. Implementing FRIS calls for something other than a simple project-based approach. FRIS is not about develo-

Universities

OAI

University colleges

ta

Da

FRIS

s art

m

IWETO

1. Speeding up the R&D value chain Using an open architecture creates opportunities for cross-border cooperation and the development of research networks. Industrial players will be able to find partners for innovation projects more quickly. Using international standards enables policy players to position themselves in relation to other governments and to compare themselves with other countries. This significantly enhances the international profile of research projects and institutions.

OAI

Services

Crossroads Bank Data Centres

CV

Classifications Thesauri Taxonomies

OAI

Research institutions

Funding bodies

Figure 8: Schematic representation of the Flemish Research Information Space (FRIS)

24

EWI 3 ENG.indd 24

03-01-2008 13:53:36

CERIF: the Common European Research Information Format CERIF was developed to provide a generic vision of an R&D information model. Two key principles underpin the project: - Information on publicly funded research projects must be made public, in accordance with the principle of open government. - It must be possible to exchange information on research projects across national borders, research being a supreme example of international information. The model enables the various research information objects - researcher, project, research organisations, publications, financing, equipment, etc. - to be kept in their full context. Thus, for instance, we can establish the relationship between a project, its financing source and the generated output. Or answer the question: “Who does what at which institution and where does the funding come from?” This information can be used by e.g.: - researchers (to find partners, identify rivals, establish cooperation networks, etc.); - research policy staff (to estimate performance and output); - research managers (to develop a research strategy and establish priorities); - publishers (to find reviewers and potential authors); - intermediary organisations (to trace inventions and ideas that could lead to knowledge transfer); - the media (to communicate R&D results in a socio-economic context); - the general public.

All information is internationally compatible, regardless of language or characters. The model can easily be expanded. The CERIF2006 version includes some major improvements, such as the introduction of a semantic layer. This data model was developed with the support of the European Commission in two phases: from 1987 to 1990 and from 1997 to 1999. The EU recommends, but does not require, that Member States use this standard. Since 2002, follow-up and management of the CERIF standard have been the responsibility of EUROCRIS (www.eurocris.org), a non-profit organisation set up to promote current research information systems (CRISs).

ping one application: it is a change programme, in which the involvement of Flemish government players is key. Openness and integration bring change aplenty in their wake and the success of FRIS will depend entirely on cooperation between the players concerned. We would therefore urge all stakeholders to contribute to this ambitious programme and play their part in making this fresh [‘fris’ = ‘fresh’ in Dutch] new approach a success.

Geert Van Grootel, Kris Maison and Pascale Dengis Statistics and Indicators Team

15 Totale O&O intensiteit in Vlaanderen 1993-2005: 3% nota. Policy Research Centre for R&D Indicators, 19 March 2007. 16 www.ewi-vlaanderen.be/iweto 17 www.ewi-vlaanderen.be/fris 18 ec.europa.eu/eurostat 19 www.oecd.org

EWI 3 ENG.indd 25

25

03-01-2008 13:53:38

RIA rules Policy-makers’ essential aim in developing any regulation is to have a positive impact on society. A regulatory impact assessment or RIA charts the possible effects of a planned policy measure, in a structured way. By describing the intended objective of the policy measure along with the anticipated positive and negative effects compared with alternatives, an RIA allows us to assess the necessity and effectiveness of a given regulation.

26

EWI 3 ENG.indd 26

03-01-2008 13:53:40

> Central theme: Government efficiency

The ultimate aim of RIAs is better regulation. In the past, too many government decisions and regulations evolved in an unstructured way. Nowadays, there is a growing realisation of the need to strike a careful balance between the likely benefits of the regulation and the costs for those involved (administration, companies, citizens and so on). An RIA helps to highlight relevant factors and moves the government in the direction of a balanced and considered solution. The RIA is thus a powerful instrument, providing a rational and analytical basis for decisions along with transparency in the regulatory process.

in 2001 with developing a system of regulatory impact assessment. In the end, the Flemish government decided to introduce the RIA from 1 January 2005. Since then, the Flemish RIA has undergone a range of changes. Following an evaluation in 2005, a distinction was introduced between light and heavy RIAs, with the emphasis now on proportionality, i.e. taking into consideration the relative importance of the regulation concerned. In 2007, with a view to fewer but better RIAs, the scope of application was changed so that RIAs are no longer used for certain types of regulation.

Where does RIA come from? Obstacles and opportunities RIA is by no means a Flemish invention. It is generally accepted that high-quality regulation plays an important role in a region’s economic performance. Hence Europe’s commitment to ‘better regulation’ in the 2005 Lisbon Strategy, one of the planks of which is the Impact Assessment. The OECD also emphasised the importance of RIA in its 1997 Report on Regulatory Reform. Regulatory impact analysis of some kind therefore exists in most Western countries. Belgium’s federal government has the Kafka test, for instance. In Flanders, the Regulatory Management Unit (formerly the Regulatory Management Knowledge Cell) was tasked back

However, there is still ample scope for improvement in the way that RIAs are used in Flanders. A frequent criticism is that RIAs are difficult to reconcile with the way Flemish regulation is developed. Usually, there is consultation at political level to decide what form the regulation will take. The RIA only takes place at a later stage, when the essence of the regulation is already fixed. However, an RIA is by nature an ex-ante assessment, an ongoing process that must occur before and during the drafting process. Currently, too many RIAs are still performed ex post, simply to confirm already drafted regulation, making them little more than an administrative formality.

This said, one positive thing to note at the EWI Department is that the requirement to compile an RIA means that more account is taken of the administrative burdens that regulation will cause, this being one of the aspects on which RIAs must report. In practice, this obligatory assessment encourages regulators to think from the outset about ways of reducing or indeed eliminating administrative burdens. The guarantee scheme for inconvenience during public works is a good example of this. As a result of the RIA, a new draft regulation was formulated involving much less administrative work. The RIA will be re-evaluated at the end of 2007, although the Flemish government has said that it intends to continue the system in 2008. At present, the impact of RIA may not be being fully felt. However, it is expected to gain ground slowly but surely and so bring about a fundamental shift in attitudes regarding the drafting of regulation, including in the administration.

Tom Vandenbogaerde and Ann Bourdeaud’hui EWI Legal Department

27

EWI 3 ENG.indd 27

03-01-2008 13:53:50

It’s all about transparency and costs an interview with Elsa Pilichowski Elsa Pilichowski studied at the Institut d’Etudes Politiques in Paris and the School of Advanced International Studies at Johns Hopkins University in the United States. After graduating, she worked on various government projects at the World Bank. She is currently an administrator at the Governance and Territorial Development Directorate of the Organisation for Economic Cooperation and Development, having worked for the OECD for the past seven years. Her responsibilities include work on public employment and human resource management (HRM) in government. In this capacity, she has published numerous OECD documents on public employment and public organisation structures. Having - together with a colleague - coordinated the OECD review of the Belgian governments’ HRM policies, she was an ideal choice as guest speaker at the Flemish government’s Middle Management Congress in Ostend in October 2007. EWI Review

28

EWI 3 ENG.indd 28

managed to catch up with her during a gap in her busy schedule.

03-01-2008 13:53:56

> Interview with

What is the role of the OECD? Elsa Pilichowski: “The OECD is an international organisation, set up in the early 1960s. It currently has 30 member countries, and a number of others are involved as observers. The OECD supports sustainable economic growth, encourages employment, works to raise living standards and safeguard financial stability and contributes to the economic growth of non-member countries and the growth of world trade. The organisation is committed to democracy and the market economy. To meet its objectives, the OECD collects large amounts of data, examines trends, analyses and forecasts economic developments, researches social changes and emerging patterns in areas such as trade, the environment, agriculture and tax systems – as well as the topic we are discussing today: public governance. Besides these core tasks, which are dictated by the 30 member countries, the OECD also engages in intensive dialogues with many of the world’s economies.” International democratic think-tank geared to the market economy How does your department fit into this? Elsa Pilichowski: “My department is responsible for monitoring trends and developments in public governance and management. It focuses on public budgeting, regulatory reform, ethics and integrity, e-government and public service personnel policy. Like many other OECD departments, in addition to cross-border analyses we also conduct peer reviews. These are discussions and assessments by a team consisting not only of OECD staff but also ‘peers’: i.e. experts from other countries, usually senior civil servants, who operate in the same field. They are appointed by their own country, and their task is to examine the country under review on the basis of their own expertise and professional experience. All OECD countries have the chance to take part in this process. The aim of a peer review is not only to help the country think about its own policy and systems; the exchange of experiences with other OECD countries on specific subjects is also important.” Belgium: an example for other OECD member countries What was the aim of the study on Belgium? Elsa Pilichowski: “The OECD Reviews of Human Resource Management in Government: Belgium: Brussels-Capital

Region, Federal Government, Flemish Government, French Community and Walloon Region20 - to give it its official title - is one of our peer reviews, the first of its kind on personnel management in government. The OECD is very grateful to Belgium’s governments for their willingness to take part in this difficult exercise. In doing so, Belgium has set an example for other OECD member states, especially as the issue is very sensitive in many other countries. Our aim with this new type of review is to investigate whether governments are managing the size, skills and competencies of their workforce in a sustainable manner and whether HRM systems are performance oriented. With federal countries such as Belgium, we examine the relationship between HR rules across governments and within each individual government. Finally, we examine whether the values promoted by governments are consistent with their HRM principles and practices.” What methodology was used? What makes this study different from others, such as those conducted by the European Central Bank and the World Bank?

Belgian governments.” A Belgian professor has said that the most recent consolidated figures on our civil service staff date from 2001. Are the figures still accurate? Elsa Pilichowski: “I have not heard that statement. We examined the figures in great detail (they are included in Annex 1 of the report), and if the data supplied were inaccurate we could fall back on our analysis of the compensation costs of employees of government departments. These were based on the national accounts, which do contain accurate data. Also, we used a variety of sources and I can assure you that they were quite consistent. We therefore have every confidence that our figures are correct. That said, I have seen misinterpretations relating to the figures in press articles on the OECD study. The figures are complicated and complicated to compare. For example, looking at the numbers it is not possible to say definitely: “there are far too many civil servants in Belgium”. It’s far more complicated that that.”

Looking at the numbers it was not possible to say definitely: “there are far too many civil servants in Belgium”. Elsa Pilichowski: “The unique feature of the OECD study is its ‘peer’ aspect. It builds, primarily, on the work of the OECD Public Employment and Management and Public Governance working parties over the past 20 years. Both these groups, which are made up of civil servants from OECD countries, were able to comment several times on the interim findings before the study was completed. Also, five OECD countries took part in the full review: senior civil servants from Canada, Ireland, the Netherlands, France and New Zealand worked for weeks on the project. A former senior civil servant from Sweden was also involved as a consultant. During the exercise, the whole team came to Belgium several times on mission, where they held lengthy interviews with civil servants from all the country’s governments. They combined these frank discussions with literature and extremely extensive documentation supplied by all

And are the figures for all OECD countries comparable and reliable? Elsa Pilichowski: “This was the first time the OECD had used the findings of its new government employment methodology in a report. This methodology compares personnel in similar organisations and sectors across OECD countries, with the aim of assessing how may staff are employed in government-funded services, regardless of whether these services are provided by public or private organisations. Admittedly, the methodology is complex and the OECD has not yet developed an easy way of unlocking the data. Nonetheless, the individual figures only make sense as part of a broader analysis of the cost of providing public services. To give a straight answer to your question: despite a number of technical difficulties - as recorded in the footnotes to the report’s annexes - we believe that

29

EWI 3 ENG.indd 29

03-01-2008 13:53:58

we have accurate and comparable data across the different countries. However, those data only make sense if they are understood in the right way and viewed as a whole.”

between regulation and actual practices on the use of employment formats - in particular the use of contractual staff; and the overregulation of HRM systems.”

HR policy: similar difficulties across Belgium’s governments

Some people conclude from the study that Belgium’s administrations should reduce the number of civil servants, with the surplus entering the private sector.

How different is Flanders’ profile from that of Belgium’s other governments? Are we doing better? And what are the specific weaknesses?

Elsa Pilichowski: “Hopefully that is not the only conclusion they take away from

8% more civil servants over the past ten years is partly a result of the federalisation process Elsa Pilichowski: “The study is not about whether governments provide better services at lower cost. We were just looking at where governments stand in terms of the way they operate the machinery of government services. In that respect it doesn’t make sense to talk about better or worse. What we can say is that Flanders has worked hard to change its service culture and organisation. The traditional career path in government is changing. There is increasing emphasis on performance and competency management. The story of HRM in Belgian government is one of transition from a centralised, rigid and highly regulated HRM system to one that is making a number of attempts to decentralise decision-making. In this transition, Flanders is leading the way. However, in recent years the federal government has also undergone some major reforms. The other governments too are currently in the process of reform. The reviewers were also struck by the similarities between Belgium’s governments in terms of HRM and in particular the difficulties they are having to deal with. They are problems largely specific to Belgium as a whole: the long-term increase in staff numbers and compensation costs; blurred political administrative boundaries and the large number of political appointees; inconsistencies

the review. Other conclusions are just as important, if not more so, for the functioning of Belgium’s governments. There is indeed a problem with the size of the workforce, but that has more to do with its development over time than with the number of staff. The long-term increase was something that particularly struck the research team. Over the past ten years, the workforce has grown by 8%, especially in the communities and regions, with no corresponding reduction in the federal government. We could not see any real justification for the increase, which seemed to be partly a result of the federalisation process. More civil servants have been taken on, mostly to perform administrative tasks. All countries that undergo institutional changes are likely to have to pay for it. However, those costs should be temporary and should decrease later on. This is the message that the review team wanted to convey as regards the number of civil servants.” Outsourcing services based on a clear strategy At the same time, the government should be relying more on private companies to perform tasks that it is currently performing itself. Elsa Pilichowski: “Belgium has a low level of outsourcing of services by the

government to companies. In other countries, most outsourcing is for low skilled positions such as canteen and cleaning personnel. In this connection, it is important to consider the number of civil servants due to retire over the next few years. Although we do not have all the necessary data, the number seems to be higher than in the private sector, as is the case in most OECD countries. It is therefore an ideal time to think about not replacing staff that leave and outsourcing low skilled services.” Will this really be a better use of taxpayers’ money? After all, the private sector is there to make a profit for itself, and will not necessarily act in the best interests of all? Elsa Pilichowski: “Certain conditions do have to be met if a country is to benefit from outsourcing: internal capacities must be built to manage contracts with private contractors. Outsourcing services must be based on a clear strategy. In all OECD countries - and Belgium is no exception - low skilled workers are paid better by the government than by private companies. Outsourcing low skilled jobs therefore has a disproportionate effect on the payroll.” Education, for example, is financed largely by the state and is of a very high quality. Can private schools offer the same level of quality for the same number of people? Elsa Pilichowski: “In this exercise, when we talk about outsourcing we are referring to services (usually low skilled) supplied to government, not services provided to citizens. The issue of private schools and hospitals is a very complex one, and is not covered by the study.” Is it then reasonable to say that staff made redundant by the government will be able find jobs in the private sector? Elsa Pilichowski: “The question of whether staff made redundant will find jobs in the private sector is a different issue altogether. Some of them probably won’t.” Social employment: difficult to combine with modern HR policy Are you pleased at the debate currently raging in Belgium? Elsa Pilichowski: “It is interesting to see

30

EWI 3 ENG.indd 30

03-01-2008 13:54:00

that the Belgian governments have reflected on a number of issues. They told us that at least some of the conclusions have been taken into account in the modernisation plans21. The fact that the broad debate seemed to focus on the number of civil servants is slightly disappointing. A number of other issues are equally important, if not more so: the politicisation of public services; inconsistent use of the contractual staff system; overregulation; inconsistent values promoted in documents and practices.” The unions, amongst others, see it as the job of government to offer employment to the ‘weaker members of society’, known as social employment. Is this a defensible and acceptable policy? Elsa Pilichowski: “Social employment is a respectable policy choice for governments on condition that it is implemented in a wholly transparent way. And the associated costs must be clear to policy-makers. However, social employment is difficult to combine with modern HR policy instruments, which are geared towards measuring individual and collective performance. Setting up parallel systems - one for social employment and one based on performance - is more expensive. It also sends out confused messages to staff and undermines the use of modern HR policy instruments.” A public manager has warned that in a few years’ time the administration will not be able to recruit the personnel it wants, partly due to the wave of impending retirements. He argues in favour of a personnel policy based on skills rather than on qualifications as is currently the case. Elsa Pilichowski: “Although more complicated, a skills-based system is more suited to a modern HR policy. In our knowledge economies, knowledge is created and destroyed faster than in the past. Governments need to adapt to this reality. Internal training policy in a knowledge economy is irreconcilable with a qualification-based policy. This does not mean that a lifetime career in public services is no longer possible. Even in OECD countries with the most flexible systems, such a career is still possible. What it does mean is that new blood can be attracted at all levels, bringing new skills into the organisation.

Under this logic, staff need to become more mobile than is currently the case. So something that Belgium really does need to address is the fact that, as a result of the federalisation process, a career in government is limited to a small entity with a limited mix of people.” Belgium: unique in terms of the number of employees in ministerial cabinets Other people think the study recommends limiting the number of staff employed in ministerial cabinets, as happens in other countries. Is that possible in Belgium and/or Flanders? Given that cabinet downsizing was one of the objectives of the recent reform of Flemish administration? Elsa Pilichowski: “Once again, it’s all about transparency and costs. The situation in Belgium is unique in terms of the total number of people working in ministerial cabinets compared with the relatively small size of governments. Before you can reduce the number of political appointees, you need to understand the causes of this situation. It is partly a historical thing, but there are other reasons too. Administrations are not responding sufficiently to changes in policy, and the HRM systems are not flexible enough. Finally, there is the high level of regulation of HRM systems. It takes a lot of motivated individuals to implement a new policy. In that sense, the cabinets are a means of encouraging highly dedicated and competent staff. Naturally, there are also less acceptable aspects of politicisation but it is difficult to measure the extent of these. A system with a large number of political appointees would be acceptable if it were transparent, if staff in cabinet were fully accountable for the outputs and outcomes of their work, if the division of responsibilities between cabinet staff and senior management were clear, and if the system was accepted as such by policy-makers and citizens. However, that doesn’t seem to be the case in Belgium. Nevertheless, it is impossible to cut back the number of cabinet employees without greater flexibility of HRM systems, a greater transfer of powers to public managers and investments in leadership.”

Elsa Pilichowski: “There is no single recipe for public management. Before reform can happen, Flemish policy-makers must answer a number of structural questions. What is the role and place of a government in providing services? What values does the government want to promote? What level of politicisation is necessary to ensure that services are provided appropriately? How much does the government want to move towards a system of ‘the right person in the right place’? Needless to say, here too there are no right or wrong answers. Each change produces positive and negative effects. It is important to build up the necessary capacity and to anticipate the changes that reforms will bring.” Need for bold and consistent strategies Finally: what was the thrust of your message at the Flemish middle management conference? “You are well paid, but your career is badly managed”? Elsa Pilichowski: “That’s definitely part of the story, but the core message is about consistency. Some valuable reforms have undoubtedly taken place in Flanders. However, a number of things are far from perfect: the rising number of civil servants, the level of politicisation, the regulatory burden, inconsistency of values, for example as regards the function and growth potential of contractual staff, and so on. The government needs to take stock of where it is today and develop bold strategies on where it wants to head in a consistent way, across all HRM systems.

Pierre Verdoodt and Peter Spyns Office for Policy Research and Foresight studies

20 See http://www.oecd.org/dataoecd/1/48/39375676.pdf for a summary and recommendations.

How would the OECD structure the Flemish administration based on the recommendations for governments in Belgium?

21 See also p. 32 of this issue

31

EWI 3 ENG.indd 31

03-01-2008 13:54:03

Challenging the government… Ten paths to a more efficient and effective Flemish government Are Belgium’s governments, and the Flemish government in particular, making the best possible use of their resources? Are they taking too much from society?... These questions are as relevant now as they ever have been.

32

EWI 3 ENG.indd 32

03-01-2008 13:54:03

> Central theme: From Flanders

Planned administrative reforms in the Netherlands and France have sparked suggestions about slimming down government in Belgium too. With government and public administration considered unwieldy and inefficient, controlling and reducing government personnel in Belgium could possibly generate substantial savings and improve the efficiency and effectiveness of government performance. An oversized government that performs only mediocrely In this discussion, reference is often made to international studies and other sources showing that Belgium has a relatively high number of public sector employees, with over 17% of the country’s active population working for the government. Obviously, this covers not only traditional general government services but also local authorities, education and so on. It is a high figure; however, countries such as Norway, Sweden and France score even higher and much also depends on the tasks performed by government. In fact, the number of public sector employees is actually increasing. However, Belgium’s governments would appear to be performing only mediocrely: a 2004 World Bank study on government effectiveness ranked Belgium in a modest 8th position out of 25 EU countries. OECD recommendations for a modern HR policy The OECD recently conducted an extensive review of the working of Belgium’s governments in the field of human resources management (HRM)22. The report contains a raft of recommendations for the Flemish government23 and suggests reigning in the numbers and cost of government staff. But the report’s recommendations go much further, encompassing a broad range of measures and proposals. These relate not only to personnel policy and HRM but also to the relationship and collaboration between the various government players, the need to work together more at administrative level to tackle compartmentalisation and the

need to clarify the division of tasks and responsibilities between cabinets and management. The report is more balanced than is often suggested. It says that in many areas the Flemish government is on the right track: in the OECD’s view, the Flemish government has, with the Better Administrative Policy (BBB) scheme, pushed through a consistent set of management reforms which have already been largely completed and implemented. It is important to build on these strengths, as there is obviously still scope for improvement. The Flemish government takes up the challenge The Board of Senior Officials (College van Ambtenaren-Generaal or CAG) analysed the report in detail and formulated a response to the OECD’s recommendations. Moreover, top-level civil servants demonstrated their commitment by drawing up a list of ten ‘paths’ with proposals for improving the efficiency and effectiveness of the Flemish public sector (see CAG memo entitled De overheid uitgedaagd…. 10 sporen naar een efficiëntere en effectievere Vlaamse overhead). The solution-oriented proposals draw on a range of sources including input from management committees in the various policy areas, collected statistical data, concept papers on measuring efficiency and effectiveness in a government context and scientific research. The whole package was sent to the Flemish ministers on 5 October. When evaluating public sector performance, we must analyse not only resources used but also process, product and effect24. The relationship between the resources used and the performance given tells us about efficiency; the relationship between the performance given

and the objectives achieved tells us about the effectiveness of the production process. Therefore, working with a quantitatively strong public sector is not necessarily a bad thing. The CAG does not therefore favour linear measures for cutting back staff numbers, such as not replacing one in three departing staff members. Rather than taking a purely quantitative or budgetary approach, the CAG advocates measures that are tailored to the size of the entities or the policy fields and domains concerned. To enable a constructive debate on staff numbers, cost, effectiveness and efficiency, thorough documentation is vital, including all necessary data such as the number of full-time equivalents (FTEs), operating costs and forecasts. This applies not just to the administration, but also to the Flemish Parliament, the Flemish government, the provinces and the municipalities. The Board has gathered a first set of statistics to this end. Personnel data must always be examined in the light of the following factors: - the ever increasing extent of government tasks and responsibilities; - the complexity of regulation; - the complicated institutional structure; - the social role of the government in terms of providing employment for its citizens. Ten organisation-wide proposals A government’s performance cannot be measured on the basis of economic cost alone. The capacity and quality of government are certainly just as relevant, as the policy programme Flanders in Action25 makes clear. For this reason, the CAG has formulated ten organisationwide proposals, geared mainly to the

33

EWI 3 ENG.indd 33

03-01-2008 13:54:05

long term and aimed at taking full advantage of entities’ individual dynamics and capacity for responsibility. The proposals are varied and include: - the urgent introduction of a management information system for the use of management, government and the public. This would ensure the Flemish government has accurate and clear figures on personnel at all times, allowing it to benchmark and adjust as necessary; - wholesale implementation of the Better Administrative Policy (BBB) scheme. The Flemish government must build on its work with BBB. The core BBB principles of relevance for Flemish government capacity must be implemented more extensively. Examples include: • developing a documented internal monitoring system by late 2008; • more and better cooperation within and across policy domains;

• clarifying the division of tasks and responsibilities between cabinets and management; • benchmarking on staff deployment, in particular for ancillary services. - an innovative ICT policy; - optimising internal organisation, including a reduction of internal administrative burdens; - simplifying HRM policy, filling in vacancies and working on staff deployment.

government structure, its capacity and quality. The CAG urges the Flemish government, Flemish Parliament, municipalities and provinces to get involved in this exercise. After all, efficient and effective government is a sound investment for taxpayers’ money, makes for satisfied customers (citizens, companies, organisations) and…keeps civil servants motivated.

The Board has forwarded its proposals to politicians and asked them to discuss about them. The aim is then to draft an operational plan setting out practical actions and allowing scope for efficiency and effectiveness measures specific to particular policy domains.

Eric Stroobants Chairman of the Board of Senior Officials

The CAG is keen to discharge its responsibility to the full in this debate and hopes with this initiative to have made a constructive and thoughtful contribution to the further strengthening of Flanders’

22 See also p. 28 of this issue 23 Public Employment and Management Working Party. OECD Review of Government Human Resource Management in Belgium (Brussels-Capital Region, Federal Government, Flemish Government, French Community, Walloon Region), 13/07/2007,134 pp. (final version). 24 See also p. 20 of this issue 25 http://www3.vlaanderen.be/vlaanderen-in-actie/actieplan.htm

34

EWI 3 ENG.indd 34

03-01-2008 13:54:06

> A number in close-up

The ß-index: a layman’s guide When I see a beta, I instinctively think of the writings of Homer, Herodotus and Euripides. That’s what a classical education does for you! Odysseus comes to mind too, and not entirely inappropriately: he is probably the closest link with science and innovation policy associated with this letter of the Greek alphabet since, in addition to his main job as a Greek hero, he is also the patron of the Flemish programme aimed at attracting scientists back to the region. For international economists and OECD officials, however, the letter ß has very different connotations. The ß-index is a measure of tax incentives for research and development and is gaining ground in OECD and other international studies26. The ß-index is therefore also used as the twelfth follow-up parameter of the Flanders Innovation Pact. ß indicates what pre-tax income a research investment of 1 US dollar must generate to cover the cost of the investment and the income tax to be paid. In other words: the amount that a research investment of 1 US dollar must generate (before tax) in order not to make a loss after payment of tax. ß is calculated using a number of parameters, such as the general corporate tax rate, tax exemptions, tax credits and depreciation of companies’ R&D expenditure.

tax exemptions and credits resulting in a reduction in income tax. The wage cost of R&D personnel is not factored in. In Belgium, however, this factor occupies a prominent place in fiscal measures. Indeed, the tax-free innovation bonus, tax deductibility for risk capital and increased investment deduction for R&D investments and patents are not the only tax incentives for R&D. Belgian firms and scientific institutions also enjoy partial exemption from the payment of withholding tax for researchers, tax exemption for additional scientific research staff and a special tax system for foreign managerial staff temporarily employed in Belgium. If these are not factored into the index, we do not obtain a complete picture: the figures underestimate the actual value of the tax reliefs.

role and impact of tax incentives in this tangled web is difficult to measure.

Useful as a guide

Karen Haegemans Policy Support and Academic Policy Team

ß-weighed in the balance A brief illustration: in 2006, ß was 0.91 for Belgium’s large companies and 1.01 for its SMEs. In order not to make a loss, an investment of 1 dollar by a large company had to generate 0.91 in pretax income; the same investment by an SME had to generate 1.01. Tax reliefs (indicated by 1-ß) for large companies covered not only the cost of tax but also part of the original investment cost. SMEs enjoyed less relief. The lower the ß, the greater the incentive for the company to undertake research and development. This index should therefore tell us the value of the tax reliefs. But this is where things get complicated: the ß-index has a number of limitations. One of these is the fact that it only takes into account

Clearly, the index does have some value as a guide. For example, the above-mentioned figures for 2006 show that Belgian tax incentives are more generous for large companies than for SMEs. In a country where SMEs are extremely important to economic development, this is a notable finding. That said, tax incentives do not necessarily lead to a high level of research and development: in Spain and Portugal, two countries with a low R&D intensity53, 1- is very high, whereas in Sweden and Finland, two R&D front-runners, the opposite is the case. Fiscal measures are just one aspect of an R&D policy mix that fosters business R&D. Also important are subsidies, rules on intellectual property rights, the financing of public research institutions and measures promoting cooperation with the private sector. The

The minister responsible for science and innovation policy has asked the Flemish Science Policy Council (VRWB) to conduct a study into the impact of fiscal measures and develop a new methodology for monitoring this. The study is being supported by a focus and steering group, in which the EWI Department is represented. Give the complexity of the subject matter, this attempt to understand the effect of tax incentives is definitely time well spent.

26 J. Warda, Measuring the Value of R&D Tax Treatment in OECD Countries, OECD STI-Review 27, 2001, p. 192.

Sources • J. Warda, Measuring the Value of R&D Tax Treatment in OECD Countries, OECD STI-Review 27, 2001, 180-207. • Innovatief België. Fiscale maatregelen en innovatiepremies voor de bedrijven, Federal Science Policy Brochure, 2006. • J. Fiers, Fiscale stimuli voor onderzoek en ontwikkeling in België, Federal Planning Bureau Working Paper 6-06, 2006. • Begroting Wetenschap & Innovatie 2007, VRWB, Advies 113.

35

EWI 3 ENG.indd 35

03-01-2008 13:54:12

> In the spotlight

Attack on a botanic garden Speaking before the parliamentary commission of 9 May 2000, Jaak Gabriëls noted that previous state reforms had seen a gap of up to eight years between the theoretical decision to defederalise and implementation on the ground. He might have added that the institutions duet to be defederalised bear the brunt of this delay27.

Figure 9: Balat Greenhouse

36

EWI 3 ENG.indd 36

03-01-2008 13:54:14

The National Botanic Garden is one of those institutions and a crown jewel of our heritage – literally, as well as figuratively, as the estate belonged to the Royal Family between 1879 and 1938. The last remaining vestige of those original sites is the Kruidtuin/Botanique in Brussels. Its scientific value is what gives the Botanic Garden its worldwide reputation. With a herbarium housing 3.5 million specimens, including the world’s biggest rose herbarium, 18,000 plant species cultivated, 48 greenhouses, a gene bank, seed bank and wild areas containing rare local plants, the Meise Botanic Garden was - before the federalisation saga got under way - one of the top 20 botanical gardens in the world. The work of Meise’s researchers, who come from Belgium and abroad, focuses on plant systematics and related fields. For historical reasons, the collections from Central Africa and Europe are of particular importance, although plants from the rest of the world are amply represented.

page’ on the Meise website makes this only too clear28. What went wrong? Under the Lambermont state reform, the Meise Botanic Garden was transferred from federal to Flemish level. Even at the time, demands for a cooperation agreement between the communities generated a lot of heated discussion. The French speaking part of Belgium still feels as if they were unfairly robbed of the Botanic Garden, while the Flemish see it as an indisputable part of a doneand-dusted Lambermont agreement. The ambiguity persists to this day. As a result, since the mid-1990s the Regie der Gebouwen/Régie des Bâtiments (Buildings Agency) has only paid for maintenance work where there is a proven safety risk, explains the Botanic Garden’s Director, Jan Rammeloo. The situation has not improved over the years. Whereas initially the Buildings Agency financed vital repairs, in 2004 it began prefinancing for the Flemish government. Now it is the Flemish government itself that provides the funds. However, the National Botanic Garden remains a federal institution until a cooperation agreement between the French and Flemish communities has been signed.

Figure 10: Giant water lily inside a greenhouse

Alongside its plant collections, the Botanic Garden has one of Europe’s leading botanical libraries. If you’re looking for information on topics such as plant systematics, plant distribution, the relationship of plants with their surroundings or the history of botany, the Botanic Garden is the place for you. The library is only one of the treasures open to the public at Meise. The estate houses a diverse range of historical heritage, from Bouchout Castle and the Vlaamse Hoeve farmhouse to the Castle Garden and the Balat Greenhouse (see Figure 9). For the general public, the Botanic Garden is above all a great recreational resource: a unique 90 hectare estate within a stone’s throw of Brussels. Seeing photos of its neglected state is therefore a painful experience for many lovers of the Botanic Garden. The ‘black

Figure 11: Wild area with local rare plants

have still not resulted in any definite arrangements. The official reason is that the French Community still has questions about the status of French-speaking staff and the inventory of certain plants in a number of herbaria. And so, seven years after negotiations on the fifth state reform, the Meise Botanic Garden remains embroiled in inter-community wrangling over a sixth state reform... A Belgian joke? Or plain sabotage?

Stijn Eeckhaut Policy Support and Academic Policy Team

27 Onrust in wetenschappelijke instelling van Meise over regionalisering, De Standaard, 10/05/2000, p.3 28 www.br.fgov.be > Nationale Plantentuin van België > doorklikken naar “De zwarte bladzijde van de Plantentuin”

Extract from “the black page of the National Botanic Garden of Belgium”: The Vlaamse Hoeve is a historic building near the main entrance. Part of it is so dilapidated and infested by fungi and mould that it could be opened as a living museum for fungi and mould in buildings (see Figure 12). The only thing that the worst affected wing has been used for in the last few decades is to shoot part of a film in collaboration with Janssen Pharmaceutica’s material protection department. It was also used as a teaching aid during the visit of a Chinese delegation organised by Janssen Pharmaceutica. The participants were heritage officers responsible for treating mould on China’s unique terracotta army.

Meanwhile, the negotiations over an agreement, or rather the details of an agreement, drag on. From March 2001, a draft agreement awaited the signatures of the two minister-presidents. In 2003, Patrick Dewael and Hervé Hasquin signed the text of the cooperation agreement on behalf of the two communities. However, when the explanatory notes were being drawn up, a number of contentious points arose which stopped the procedure in its tracks. In 2005, fresh talks began between the then Flemish minister-president Yves Leterme and Marie Arena, minister-president of the French Community. These

Figure 12: Mouldy mouldy on the wall …

37

EWI 3 ENG.indd 37

03-01-2008 13:54:17

Earning a doctorate in Flanders The pinnacle of academic studies, doctorates - the opportunity for young researchers to show that they can make an original and independent contribution to science - are an important indicator of the quality of university education and research. The demand for highly trained researchers in Flanders’ knowledge economy is expected to rise over the coming years. Interest in the subject of doctorates is also increasing, in proportion with the need for highly trained research personnel. Contradictory reports appear in print. On the one hand, entrepreneurs complain of a shortage of highly trained personnel in science, technology and innovation. On the other hand, doctors - the very epitome of high level training - are often associated with a lack of job opportunities and even unemployment, accused of lacking experience of the real world, being over-specialised and unsuited to the big bad world outside the university gates.

Faced with this perception, we need to take a look at the figures. How efficient is the doctoral process in Flanders? The key indicators for efficiency are: completion rate and job opportunities. Who pays for a doctorate? The main options for funding a doctorate in Flanders are the PhD grant of the Research Foundation - Flanders (FWOaspirantschap), the post-graduate grant of the Institute for the Promotion of Innovation by Science and Technology in Flanders (specialisatiebeurs), the BOF grant (BOF-beurs) and the assistantship (assistentenmandaat). In addition, some doctoral students work on research projects carrying out a specific research task which can be supplemented with their doctoral research. For those with a promoter but no funding, another option is obviously to cover their own costs.

The Flemish government, represented by the EWI Department, funds the IWT grant and the FWO grant via the agencies IWT and FWO. While FWO doctoral students concentrate on basic research, IWT fellows usually work on a more applied project. Graduates from the various universities compete for these two types of position. Currently, 190 aspirant positions and 200 IWT specialisation fellowships are awarded each year. This difference is notable since IWT fellowships are only open to candidates from a limited number of exact and applied science fields, whereas the FWO covers the whole academic spectrum. As a result, researchers from the exact and applied disciplines have more options when applying for a doctoral fellowship than those working in the humanities, for example. Another Flemish government funding

channel for basic research is the Special Research Fund (Bijzonder Onderzoeksfonds or BOF). Every university is responsible for managing its own BOF funds. Competition for BOF grants is limited to proposals within a given university (intra-university competition). There are therefore various doctoral schemes in Flanders, each with its own selection criteria, employment conditions and procedures. Every academic research project starts with a search for the right funding channel. At first glance, the existence of so many different schemes would not seem the most efficient way of awarding doctoral fellowships. However, it does have a major advantage: each fellowship scheme has its own characteristics and suits a particular type of researcher. The plethora of schemes means that a very diverse range of researchers are catered

38

EWI 3 ENG.indd 38

03-01-2008 13:54:22

> Policy in practice

for. Diversity as the basis for creativity and innovation, one might say. Do all doctoral students become doctors? What is the doctoral completion rate? The Flemish Science Policy Council (VRWB) has published a study entitled Doctoreren aan Vlaamse universiteiten29, which compares the number of people who actually earn doctorates with the number who embark on them. The most important findings are: • The higher the (under)graduate marks, the greater the chance of completing the doctorate and the shorter the time taken30. • A full-time position is the best guarantee of completing the doctorate: the completion rate rises in proportion to the number of hours spent on the doctorate per week31. 34% of the research intake earned a doctorate in the review period. This percentage rises to 67% for researchers working full-time over 4-6 years32. • The completion rate varies sharply according to faculty and scientific field33 (see Figure 13). The completion rate in the humanities is significantly lower than in the natural and applied sciences. The question is how to interpret these differences34. Completion procedures; membership or otherwise of a research group; support offered; requirements imposed; the approach to literature; added value on the labour market: all these factors vary considerably from one discipline to another. The ability to put the doctorate to good use on the labour market undoubtedly contributes to the greater level of motivation seen in a number of disciplines. • There is a hierarchy of completion according to funding scheme. Those on FWO grants (77.5%) and IWT grants (76.7%) are most likely to complete

their doctorate, followed by those with project grants (BOF, IWT and FWO) (42.7%), assistants (31,3%) and other grant holders (26.6%)35. • This hierarchy is exactly mirrored in the speed of completion, with FWO fellows taking the least time and assistants the most36. The average length of a doctorate is 5.4 years. 25% of researchers complete their doctorate in 4.2 years, 50% in 5.2 years and 75% in 6.4 years37.

A fourth explanation may be the selection procedure. If completion rates are to rise, it is vital that assistants - just like FWO and IWT fellows - be selected on the basis of academic excellence. Teaching and personal skills may be more important in assistants than in fellows, whose positions are geared exclusively towards research, but these should not be a substitute for a lack of academic motivation. And after university?

FWO, IWT or assistant? These differences in completion rate between the various fellowships/grants are striking, with university assistants and BOF grant holders in particular scoring far too low. Which begs the question – why? Job hopping - or rather fellowship (s)hopping - may offer one explanation. In researchers’ eyes, there is an informal hierarchy of fellowships. Some positions are abandoned prematurely by successful candidates in favour of a more prestigious and/or financially attractive doctoral fellowship. A second explanation may be that this group is more encumbered with other tasks besides research work38, although this is partially offset by the longer duration of their fellowship. A third possible explanation for the low score may be the fact that the individuals in questions are motivated less by research and more by teaching. It would seem that, for assistants, academic ambition is much less of a reason for beginning a doctorate (see Figure 14)39. Given that they tend to be the ones most assigned to teaching duties, this may not be such a bad thing. However, we should not lose sight of the fact that their primary task is to complete a doctorate. At least half of their time is to be spent on research.

The employment opportunities of doctors also vary. The VRWB study Perspectieven uitgestroomde wetenschappers op de arbeidsmarkt40 (Labour market prospects for ex-university researchers) examined the careers of different exuniversity researchers41. Inexperience of the world appears not to be a major problem. In general, young researchers seem to find good jobs relatively easily, even if they have not completed their doctorate. The great majority of ex-university researchers in the period 1990-2000 found work immediately after leaving university; only a fifth experienced temporary involuntary unemployment. Of the latter group, over half found a job within six months of leaving university. Some had a tougher time of it, namely biologists and chemists, historians, art historians, theologians and philosophers42. This VRWB study also shows that doctorates in the natural and applied sciences and medicine in particular bring social benefits (in terms of income, additional benefits, access to managerial roles, etc.), whereas this is hardly true of the cultural and behavioural sciences43. Employers’ perceptions are coloured by prejudices and by the higher labour costs of candidates with a PhD. Those with a humanities doctorate suffer from the fact that the business world is una-

Completion rate by discipline Educational sciences

8%

Law

14%

Arts

26%

Biomedical sciences

52%

Chemistry

71% 0

Figure 13: Completion rate by discipline

EWI 3 ENG.indd 39

20

40

60

80

100 39

03-01-2008 13:54:25

% reason for startin % neutral % not reason for start Other statutes Other project Paid assistant FWO/IWT/BOF Basic research project 0%

20%

40%

80%

60%

100%

Figure 14: Academic ambition among doctoral students

Percentage of doctorate holders as a proportion of the reference population – international comparison

2000-2001

2001-2002

2002-2003

FL

0.8

0.9

1

2005 -

BE

1

1.1

1

1.2

NL

1.3

1.3

1.3

1.5

FR

1.4

1.4

1.2

-

SW

2.7

2.8

2.8

2.2

OECD

1.1

1.2

1.3

1.3

ous factors affect not only the completion rate but also the economic viability of doctorate-holders. Finally, a word for those eagle-eyed readers among you. You will have noticed that the figures we are using are (by necessity) somewhat old. To remedy this problem, the Policy Research Centre for R&D Indicators46 has recently started work on an integrated database system for doctoral output in Flanders. This will allow us to follow the latest developments much more closely.

International figures show that it is important to monitor trends closely and if necessary offer better support to our doctoral students and make doctorates more attractive. The number of people earning doctorates in Flanders is relatively low in comparison with other OECD countries, although the percentage of people with doctorates did rise between 2000 and 2003. This is encouraging, but the OECD average is higher and saw an identical increase47.

ware of or undervalues their potential. Obviously, the value of a doctorate is not solely determined by the labour market. A doctorate is also a way of conducting research in relative freedom and of realising one’s potential. That said, to avoid major disappointment when leaving university, young people must start their doctorate for the right reasons and realise that a purely academic career for all doctors is not realistic.

Peter Bakema and Karen Haegemans Policy Support and Academic Policy Team

Flemish universities are being adapted to new challenges and reorganised into doctorate schools and support projects geared, amongst other things, to equipping doctoral students with a broader range of skills.

29 M.S. Visser and H.F. Moed, Doctoreren aan Vlaamse universiteiten (1991-2002). I. Kwantitatieve analyse. Brussels: VRWB, 2006 (Study Series No. 15). Also available electronically on the VRWB website: www.vrwb.be.

No generalisations

32 Doctoreren aan Vlaamse universiteiten. Kwantitatieve analyse, p. 145-146. 33 Doctoreren aan Vlaamse universiteiten. Kwantitatieve analyse, p. 87-89.

One result of the lack of labour market prospects may be that, as a UGent and K.U.Leuven questionnaire highlights, doctoral students in the humanities see an academic career as an important reason for starting a doctorate44, more so than those in other disciplines. The ambition or otherwise to have an academic career, the scientific field and the perceived future prospects offered by a doctorate would appear to be tightly bound up with one another. However, most of them will end up pursuing careers in the private sector. Transparency and career guidance can from the outset play an important role in how doctoral students see themselves and their future career.

The efficiency of the Flemish doctoral system can be assessed in three areas: funding schemes, completion rate and job opportunities. The existence of different types of funding arrangement - FWO PhD grant, IWT PhD grant, BOF grant and assistantship - has obvious advantages: individual selection criteria, different target groups, choice for students, and so on. It is like different companies producing very similar products. Other European countries too have different schemes running side by side. Each has its own level of efficiency in terms of completion rate, and students’ success at completing their projects varies according to discipline and type of position. Job opportunities also vary, not so much according to the type of position but more according to the discipline to which the doctorate relates.

For these reasons, there is a need in the academic world - and not only in the humanities, but in all disciplines - to hone those skills that the private sector expects of its employees45. It is clear that universities are committed to supporting their young researchers. Long-standing PhD courses offered by

Let us be clear: the most important thing here is to avoid generalisation. Each doctor is individual and unique. Chances of success during and after the doctorate vary from candidate to candidate, the main criteria being the type of doctorate, the funding source and, above all, the discipline. All these vari-

30 Doctoreren aan Vlaamse universiteiten. Kwantitatieve analyse, p. 86, 94. 31 Doctoreren aan Vlaamse universiteiten. Kwantitatieve analyse, p. 84, 92.

34 Doctoreren in Vlaanderen, p. 66; Doctoreren aan Vlaamse universiteiten. Synthesenota en aanbevelingen, p. 28. 35 Doctoreren aan Vlaamse universiteiten. Kwantitatieve analyse, p. 63, 69, 129. 36 Doctoreren aan Vlaamse universiteiten. Kwantitatieve analyse, p. 115. 37 Doctoreren aan Vlaamse universiteiten. Kwantitatieve analyse, p. 56-58. 38 A. Verlinden, N. Rons, K. Vercoutere and E. Spruyt, Doctoreren aan Vlaamse universiteiten (1991-2002). II. Synthesenota en aanbevelingen. Brussels: VRWB, 2006 (Study Series No. 15), p. 55; A. Verlinden, J. Billiet, H. Pyck et al., Doctoreren in Vlaanderen. Verslag van de survey aan de Universiteit Gent en de Katholieke Universiteit Leuven. Ghent-Leuven, 2005, p. 35-38. Also available online at http://www.kuleuven. be/doctoreren/presentaties/doctoreren_survey.pdf. 39 Doctoreren in Vlaanderen, p. 20-21 + table 7. 40 R. S’Jegers, J. Braeckman, L. Smit and T. Speelman, Perspectieven uitgestroomde wetenschappers op de arbeidsmarkt. Brussel: VRWB, 2002 (Study Series No. 6). Also available electronically on the VRWB website: www.vrwb.be. 41 i.e. researchers who have worked in a position of some kind at a university, whether or not with the intention of completing a doctorate. 42 Perspectieven uitgestroomde wetenschappers, p. 62-64. 43 Perspectieven uitgestroomde wetenschappers, p. 77-78, 83. 44 Doctoreren in Vlaanderen, p. 26-27 + figure 2. 45 Perspectieven uitgestroomde wetenschappers, p. 84. 46 See also p. 41 47 Vlaamse onderwijsindicatoren in internationaal perspectief. 2003/2004/2005 editions, table OUT3.1. OECD - Education at a glance, 2003-2006

40

EWI 3 ENG.indd 40

03-01-2008 13:54:26

> Policy Research Centres

The Policy Research Centre for R&D Indicators The mission of the Policy Research Centre for R&D Indicators (Steunpunt O&O-Indicatoren) is to develop and maintain a consistent and coherent system of Research, Development and Innovation (RD&I) databases and related policy indicators. The indicator system is designed to enable the Flemish government to map and monitor RD&I efforts in the Flemish Region as part of its science and innovation policy. The Policy Research Centre provides the Flemish government with up-to-date and relevant statistical data on the region’s R&D and innovation performance. It also conducts scientific research into new indicators and carries out comparative studies on the effects of R&D policy measures and contingent policy instruments. The Policy Research Centre (PRC) also undertakes ad-hoc assignments and projects at the request of the Flemish government. To carry out its mission and assignments, the PRC is developing a portfolio of relevant research activities and has already built up an integrated and structured set of databases. These contain data derived from its own, original data collection together with information from existing databases, acquired under licence agreements and adapted and refined according to the Flemish research context. Database structure The original or primary data collections cover two major research fields. Firstly, there are the biennial RD&I surveys, in which Flemish companies are asked about their research activities (via the OECD R&D survey) and their innovation efforts via the Community Innovation Surveys (CISs). This research is implemented in accordance with international agreements. Secondly, efforts to compile and update a database on doctoral researchers48 (and their career characteristics) in Flanders are ongoing. The database also documents

the intersectoral and international mobility of researchers, this being a closely related issue.

have been processed and integrated into a patent database focusing on Flemish inventors and applicants.

Alongside this, the PRC has developed based on databases acquired under licence (secondary databases) - a consistent time series of indicators based on bibliometric and technometric data dating back to the early 1980s. The bibliometric data structures have been developed under a comprehensive licence agreement with the Institute for Scientific Information (ISI-Thomson) and include the complete primary data structure of the Web of Science (WoS). The PRC has integrated the primary data structure from the WoS into a database for indicator development serving both research and policy objectives. The technometric data structures are developed and operated under licence agreements with the suppliers of the large patent databases - the European Patent Office (EPO), US Patent & Trademark Office (USPTO) and World Intellectual Property Organisation (WIPO). They

Supporting policy studies and decisions Using the data sources it has compiled, the PRC can support the Flemish government by providing relevant data in a number of regular assignments, policy studies and policy decisions. For example, publication and citation data for Flemish universities have been calculated annually over a 10-year period (after validation by the universities) based on the bibliometric databases in the Science Citation Index Expanded part of the Web of Science. They are used for the annual allocation of research budgets to the Flemish universities based on the Special Research Fund (BOF) key49. Data from the patent databases also provide the input for the annual calculation of the Industrial Research Fund (IOF) key50. In addition to this, the above data struc-

41

EWI 3 ENG.indd 41

03-01-2008 13:54:27

Name: Policy Research Centre for R&D Indicators (Steunpunt O&O-Indicatoren) Promoter-coordinator: Prof. dr. Koenraad Debackere Consortium members: - K.U.Leuven - Ghent University - University of Antwerp - Vrije Universiteit Brussel - Hasselt University Address: Dekenstraat 2, B-3000 Leuven, Belgium tel.: +32 (0) 16 32 57 29 fax: +32 (0) 16 32 57 99 Website: http://www.steunpuntooi.be Minister responsible: Flemish Minister for Economy, Enterprise, Science, Innovation and Foreign Trade Budget: 1.726.000 euro

42

EWI 3 ENG.indd 42

03-01-2008 13:54:27

tures help the Flemish government to resolve important policy issues and in its evaluations of the actors in the Flemish research landscape. Examples include studies on the bibliometric and technometric input of strategic research centres like IMEC and the VIB and bibliometric analysis of the projects and post-doctoral researchers supported by the Research Foundation - Flanders (FWO)51. Other areas of interest are research into doctoral efficiency52, researcher mobility (between institutions and countries) and the effect of gender on research activity. Naturally, the compiled databases also enable international comparisons on these topics. Innovation studies and indicators However, the PRC’s assignments for the Flemish government do not relate to the academic research landscape alone. The government also has important questions and assignments in the field of innovation studies and indicators, one example being the biennial calculation of Flanders’ status in relation to the 3% R&D objective53 using the OECD R&D survey. This gives the Flemish government an up-to-date picture of R&D expenditure in the private and public sector in Flanders, both in absolute terms and as a percentage of the region’s GDP. The relevant international comparisons and benchmarks are performed in connection to these norms and standards. The innovation performance of Flemish companies, as derived from regu-

lar Eurostat CIS surveys, is another area of study. Flanders’ various innovation actors make extensive use of the survey results when mapping and examining the innovation activities of companies and sectors.

for anyone wanting to look into or find out more about the Flemish innovation landscape.

Of course, the PRC does more than simply report data and indicators. It carries out studies to map and accurately estimate the additionality effects of the Flemish government’s R&D efforts. This reassures the government that the resources it invests in company research are resulting in significant, intramural54 R&D expenditures at the companies receiving its support. The PRC also maps and monitors the distribution of RD&I financial resources and expenditures between the different actors in the Flemish innovation system.

Flemish STI Indicator Book Thus, the Policy Research Centre for R&D Indicators provides the Flemish government with a unique and integrated array of data sets and statistical instruments that allow to map and monitor the activities and results of the Flemish research and innovation system. Every two years, the most significant data, indicators and study findings are combined and reviewed in a publication known as the Flemish Indicator Book for Science, Technology and Innovation (STI). The latest edition appeared in late 2007, updating previous editions from 2003 and 2005. It is a handy guide

Koenraad Debackere Coordinator of the Policy Research Centre for R&D Indicators (K.U.Leuven) Edited by Peter Viaene Office for Policy Research and Foresight studies

Vocabulary Indicators are variables that can be used to give an aggregated view of RD&I activities. Examples of indicators are Flanders’ R&D intensity (the so-called ‘3% objective’53), the publication activity of Flemish universities and the international impact of research publications by Flemish universities. By bibliometrics we mean the measurement and characterisation of publication output by researchers, research groups and research institutions. This is done using publication databases, the most well-known and used of which is the Web of Science, provided by ISI-Thomson in Philadelphia. These databases catalogue and index scientific articles published in peer-reviewed journals dating back to the 1980’s. By technometrics we mean the measurement and characterisation of technological progress by analysing the patent output of inventors, organisations, regions and countries. This is done using patent databases such as those created and published by national and international patent offices, of which the most well-known are the WIPO (World International Property Organisation), EPO (European Patent Office), USPTO (US Patent and TradeMark Office) and JPO (Japan Patent Office). 48 See also p. 38 of this issue. 49 Every university has a Special Research Fund (BOF) to finance basic groundbreaking research. The BOF is the funding channel that allows universities to develop their own research policy and to support research over the longer term. Proposals (projects and positions) are submitted by members of the university’s own academic staff. The BOF key is the key used to distribute this funding between the various universities. 50 Established in 2004, the Industrial Research Fund (IOF) provides the Flemish universities with the funding they need to develop their own policies on strategic basic research leading to exploitation and research valorisation activities. Here too, a distribution key with various parameters and weightings is used to allocate the funding between the universities. 51 FWO-Vlaanderen implements government policy on fundamental research. It is a government agency that distributes funding between universities and research institutions. 52 Doctoral efficiency considers factors such as the duration of the doctoral process and the development from junior to senior level – see also p. 38 of this issue. 53 See also EWI Review 1 (1): 14-17 and EWI Review 2 (1): 32-37. 54 Intramural expenditure is the total R&D spending within an institution, irrespective of funding source and including current expenditures and investments.

EWI 3 ENG.indd 43

43

03-01-2008 13:54:29

> Focus

Can we settle for a bit less? The long-term development of our society depends largely on how effectively the economy, science and innovation respond to the challenges of the future. Sustainable development may be a fashionable phenomenon, but it is and will remain an extremely important issue. The idea ‘think globally, act locally’ is becoming ever more relevant in all areas of life. When we in Flanders consider our longterm future, we have to realise that every form of economic development - on which the prosperity, and above all the well-being, of our society, is based - will be subject to a number of increasingly weighty restrictions. The idea of ‘limits to growth’ first emerged in the 1970s, but at the start of the 21st century it is more relevant than ever. The earth has a dwindling supply of resources to support economic growth, all the more so as its population expands. On the other hand, recent years have witnessed major progress in scientific research. The technological developments of the past few decades mean than our society is able to respond more effectively to the challenges of the future. In other words, tomorrow’s world will be a different place, but no less attractive for that. Though we cannot fully control our future, we can help to shape it. By using

economic development to react to the opportunities, as well as the increasing restrictions, of our world, we can ensure that tomorrow’s society will be better than today’s. In essence, we must achieve qualitative improvements over the long term by reckoning with quantitative restrictions in the short term. Through innovation and research - based on the knowledge that the reserves available to man are limited, but that increasing technological developments are a potential solution to this - the business world can make a major contribution to healthy, sustainable growth that will benefit all of society. The economy and sustainable development The government plays an important role in developing sustainable economic policy. Sustainable development is no longer confined to the environment or to purely ecological issues. Ageing

population in Europe and exponential population growth in other parts of the world will create new challenges in the coming decades. The ‘footprint’ of this mass of humanity is too big to be measured solely in terms of the environment. In other words: sustainable development is now a matter for every individual and hence for every type of policy. From combating poverty, through tackling the greenhouse effect to care for the elderly, from infrastructure projects to educational reform: all aspects of our society need to be called into question, if not in the short term then in the medium to long term. However, this plethora of issues cannot be dealt with at a stroke. Cooperation between all partners - government, academics and business - is required to ensure effective action, without obviating the need for every individual to take responsibility for his or her

44

EWI 3 ENG.indd 44

03-01-2008 13:54:31

personal footprint. The same applies to the economy, science and innovation, where mutual cooperation can lead to real, positive results. Putting good ideas into practice, translating science into innovation and thereby giving the economy the means to develop in a sustainable way. To look far into the distance, you often need to stand on tiptoe. The smaller the footprint, the sharper the vision. Futureoriented thinking often equates to very simple gestures. Building a sustainable economy Away from the hype that has developed around sustainable development in recent years, there is room for a visionary policy. This is not simply a moral necessity. It is also a challenge offering new growth perspectives, which the

economy can exploit in order to benefit the whole of society over the long term. Positive and sustainable entrepreneurship is an idea that is increasingly percolating to the top of the business world. Not only does it immediately enhance the image of the initiator, but it also drives up efficiency and guarantees it in the long run. Here too, the same old principle applies: research and innovation lead on to success. Those who react most efficiently to the challenges of the future win hands down. It sounds counterintuitive but the fact that there are ‘limits to growth’ does not have to dampen economic development. Quite the opposite. A better understanding of the opportunities offered by the future can spur on economic growth, without our society or the planet on which we live ultimately

paying the price (probably for the first time in history).

As leading mid-20th century economist Joseph Schumpeter55 once said: in a capitalist society it is not only important to have good ideas; what also matters is having the right idea at the right time. Sustainable development is a good idea, and the time is now ripe to put it into practice.

Frank Vereecken Office for Policy Research and Foresight studies

45 55 See also p. 6 of this issue.

EWI 3 ENG.indd 45

03-01-2008 13:54:33

> Innovation in action

Strengthening our innovative environment Government efficiency is a hot topic, as this issue of EWI Review makes clear. Civil servants are hard at work on it. Business leaders talk of unwieldy government machinery that could be much more efficient. Administrative simplification; improving customer satisfaction; the one-stop shop for businesses; mobility schemes; innovations at every turn. However, it isn’t quite as simple as it seems at first glance.

Flanders DC wanted to find out whether innovation training can really make a difference. It began its experiment by organising a competition under the slogan “Don’t invest in innovation”, aimed at civil servants with an innovative idea. The prize was an innovation management course at the prestigious Vlerick Leuven Ghent Management School56, giving the winner the know-how needed to put their idea into practice. The competition was won by Eric Kenis of the Flanders Traffic Control Centre57. Following his master class in innovation and entrepreneurship, we asked him how it all went and about the differences between innovation in companies and government departments. Eric’s project “I had the idea of creating a traffic information system that gives drivers tailored and up-to-date traffic information and speed advice while also directing vehicles away from road closures and congestion – something known as vehicle telematics

in the trade. It was a highly ambitious and complex project, involving lots of different parties, and was therefore best tackled at a higher level than Flanders,” Eric Kenis explains. To implement an idea like this, you need to know the best approach to adopt. Was an innovation course useful in this respect? Eric Kenis: “A course doesn’t give you the solution on a plate, but it was an incredible experience. Everyone tends to overestimate their own ideas; the professors give you tools that allow you to gain a better understanding of your project and therefore make better judgements.” Mobility is an issue for everyone, whether they like it or not. “ Which means that everyone has an opinion on it, some of them quite pronounced,” Eric goes on. “Those opinions are not always based on a solid foundation of knowledge. If traffic was easy to manage and control, we wouldn’t have the problems we do now. There isn’t a single quick-fix solution.

Traffic is an inexact science that operates according to an interactive process. Every innovation or adjustment can generate unexpected effects. Obviously, that doesn’t mean that we should sit back and do nothing...” Innovation = idea + entrepreneurship + management Innovation starts with an idea. But it doesn’t end there, as Eric Kenis explains: “You need to know how to sell that idea. You need to be able to convince people. In the initial phase that’s probably the most important thing. And to do so takes a healthy dose of entrepreneurship.” The trickiest parts include convincing investors and drawing up the financial plan. Patents are also tough. “But even if something is patented, that doesn’t mean that you can’t do anything with it. You can find solutions that work for everyone. That’s all part of entrepreneurship,” he says.

46

EWI 3 ENG.indd 46

03-01-2008 13:54:34

Eric Kenis

At a later stage, what you really need to develop your idea is management skills so that you can administer resources and people. In other words, you need to start as a good entrepreneur and finish as a good manager. Does the government need innovation? The big difference between governments and companies is their objectives. Companies are out to make a profit. When launching new products or services, they ensure that the different links in the chain work together as efficiently as possible in order to maximise profit and keep the initiative going. “In government, things are different,” Eric Kenis says. “Profit for a government is user friendliness, quality service and customer appreciation. That type of profit is much harder to measure, certainly in financial terms.” In very many cases, it is not government’s job to be radically innovative. “Innovation for innovation’s sake, as sometimes hap-

pens with consumer products, is wrong. Changing laws and regulations every five minutes creates confusion. Government innovations must be approached carefully, but also efficiently.” 99% of innovation is about improving efficiency Innovation doesn’t have to be radical. Indeed, there are different degrees of innovation. In 99% of cases, innovating means continually improving existing processes. The objectives can vary, from boosting efficiency to improving user friendliness or auditability. Examining the use of techniques or processes from other fields can also be part of this. “Civil servants need to be constantly aware of the impact that innovation has. For precisely this reason, the Traffic Control Centre regularly performs exante impact analyses, for example when imposing a speed restriction during smog alerts. Reducing speed not only lowers

exhaust emissions but also cuts the likelihood of accidents. On the other hand, it can sometimes adversely affect individual traffic flow.” This brings us to strategy, a cornerstone of the Vlerick course. Says Eric Kenis: “Developing a strategy means making choices. You have to think well ahead and be aware that you’ll have to make sacrifices in other areas. In a traffic scheme, choosing to focus on environment and safety might have implications in terms of congestion. These are the kinds of things you need to weigh up in your strategy. In government, the collective good will always take precedence over the individual.” So, how is Eric’s project faring today? “We’ll still working on it. Some pieces of the jigsaw are being filled in at Flemish level, through participation in research projects and work on a Flemish speed database, amongst other things. There are lots of stakeholders involved, all of whom need to invest a lot in the project.

47

EWI 3 ENG.indd 47

03-01-2008 13:54:47

It doesn’t seem to be quite the right time yet as all the links in the chain need to be able and willing to contribute. Also, although a telematics project will mean more efficient traffic flow, it won’t be a panacea. A fundamental imbalance can’t be solved with monitoring and steering alone; spreading or reducing transport demand is also necessary.”

Ripe for change: our ‘lawn culture’ and framework conditions

example, are more open to new technology. The Flemish are not particularly keen to see others succeed, instead practising a ‘lawn culture’ where anyone growing above a certain level gets their head mown off. We often look askance at success and are too intolerant of people making mistakes. Yet to err is human, and we can often learn a lot from our mistakes. Failed entrepreneurs in Flanders have an incredibly tough time getting back on their feet whereas in the US they are much sought after by companies, who realise that they have accumulated more experience in a short space of time than somebody who has worked for ten years in a risk-free environment.

Flanders is distinctly reluctant to embrace innovation, according to a number of studies. The Scandinavian cultures, for

Where can the government do better? “We can do more to create an innovative environment,” Eric Kenis believes. “Real

Eric is now on secondment to the EU. “I am working on a European action plan for telematics and related services which should be ready by mid-2008.”

innovation stems from ideas. They are the seed of all innovation. Organisations therefore gain from having an organisational culture that encourages people to share ideas. Also, it is important for everyone to be imbued with the vision and strategy. The government is quite top-down in this respect. That’s not a problem in itself, but a vision has to be accessible to all. Every link in the chain counts, whether in traffic or in government administration.”

Koen Peeters Flanders District of Creativity vzw

Flanders DC in a nutshell As the Flemish body responsible for entrepreneurial creativity, Flanders District of Creativity (Flanders DC in short) sits at the crossroads of economy, science and innovation, where creativity rules supreme. Entrepreneurial creativity is about developing and realising new ideas. And not just any ideas: ideas that will create more jobs and well-being in our region through strong, highly competitive businesses. Flanders DC was set up by the Flemish government in 2004 as a non-profit organisation (vzw) responsible for fostering entrepreneurial creativity among all relevant stakeholders: companies, policy-makers, the education sector and the general public. With this in mind, Flanders DC developed “GPS for Enterprises”, a simple but effective brainstorming method; it was also behind the “You are Flanders’ Future” campaign. The Flanders DC Knowledge Centre at the Vlerick Leuven Ghent Management School studies various aspects of entrepreneurial creativity and disseminates this knowledge among stakeholders. The Flemish government has a representative on Flanders DC’s Board of Directors.

For more information, visit the creativity portal at www.flandersdc.be 56 http://www.vlerick.be/en/home.html 57 http://www.verkeerscentrum.be/verkeersinfo/startpagina

48

EWI 3 ENG.indd 48

03-01-2008 13:54:48

> Column

Light in the darkness EOS Magazine devoted the front page of its September issue to the results of a knowledge test entitled “Belgians and science”. The main conclusions58 of the popular science monthly were: Young people score particularly badly; Homeopathy enjoys a strong following; There is a digital divide between the generations. Queue another round of the ageold educational debate: knowledge vs skills…

The results made front-page news and triggered reactions from various ministers. But how surprised should we really be? How little do our young people really know? And as for the revelations that lots of people believe in homeopathy and there is a digital divide between the generations, one suspects not many of us will be falling off our chairs in amazement… Questions and answers The magazine asked a series of questions to 713 Belgians, the usual ‘representative sample’ of the population (“Why do they never ask me anything?” I can’t help thinking). It breaks down the results into age categories, and reaches the startling conclusion that 18-24 year olds score less well than their older compatriots. What were the questions? As EOS explains in its introduction, they were not chosen at random but were taken from

the Eurobarometer59. Similar questions are used in the United States in National Science Foundation surveys. However, no list of 28 questions is enough to determine a person’s ‘general knowledge’, and it could be argued that not all questions are equally important. One of the most surprising - and for some rather disturbing - results of the knowledge survey was that 33% of young people between the ages of 18 and 24 said that it was not true that the Earth revolves around the sun. Only 12% of the 65-75 year olds answered this question incorrectly. 20% of people do not know, or do not believe, that man is descended from apes. On this question, EOS reports no significant difference between age groups. Meanwhile, 64% of Belgians are unaware that the national grid supplies alternating current. Now you may disagree, but personally I have less of a problem with this. Similarly, I do not consider the fact that 59% of Belgians are unaware that

computers count using the binary system to be evidence of the digital divide. How many experienced drivers could correctly explain how the petrol engine works? In this connection, it is noticeable that the youngest generation (18-24) scores lower on ICT-related questions than those aged 25-34. Young people can surf the web and install programs but don’t know what a byte is. Or a CPU. But then, do they really need to? Sense and nonsense The survey measures factual knowledge in a limited number of areas. It does not tell us a lot about young people’s general development as many areas of knowledge were totally unrepresented in the survey. Hence, research of this kind tells us little about the knowledge acquired at school or about educational standards. The results are too specific for that and there is too little assessment of intellectual capacity.

49

EWI 3 ENG.indd 49

03-01-2008 13:54:49

It does not measure individuals’ talent for analytical thought and totally ignores their capacity for finding original solutions to problems: in other words, their creativity and inventiveness (precisely the abilities required by scientists).

a great deal about all sorts of different things, but the body of general factual knowledge - divided by everybody - may well be shrinking.

Various international studies suggest that the population’s IQ has risen in recent years. As usual, there is disagreement on the nurture v. nature question: is the improvement a result of better education or better nutrition? Now there are a lot of IQ tests, but they all have one thing in common: they measure analytic or problem-solving ability rather than acquired knowledge. Despite all the alarming reports of declining standards among young people, there is no evidence to suggest that today’s youngsters are less intelligent than in the past.

So is there nothing at all amiss? Well, yes, perhaps there is. I sometimes feel that superstition is on the rise. The increased scope for self-expression in today’s society makes it seem as though everything now is an opinion, a point of view; the weight and authority of science is being called into doubt and increasing numbers of ‘views’ are on display - a sort of ‘postmodern shopping mall’, you might say. I recently had an age-old argument with a good friend of mine who refused to believe that, after throwing tails 100 times, you still have a 50% chance of throwing tails on the 101st throw. “That’s your opinion,” he snarled. But, of course, not everything is a matter of opinion.

It is overstepping the mark to assert, on the strength of the EOS survey, that young people’s knowledge has declined. Factual knowledge depends on a number of factors: information present and available, social pressure, age, intelligence as well, of course, as interest and attitude. There are ‘fact people’ and quiz champions, but there are other people who don’t feel that having a lot of factual knowledge is important. The link with intelligence is that intelligent people assimilate knowledge more easily and generally have a better memory because they are better at establishing links. However, there are also plenty of examples that contradict this, from ‘idiots savants’ to people with a very high IQ who lack learning or cultivation. Thanks to the enormous increase in available knowledge and greater opportunities for accessing it, people’s general, overall factual knowledge is unlikely to be less than that of previous generations. On the contrary. Young people nowadays probably know a lot more than their counterparts 30 years ago, although it is very likely that the ‘greatest common divisor’ in knowledge terms has reduced. This may indeed be related to the increasing focus on skills and the relative lack of interest in today’s education system for cramming facts. Or to put it another way: young people know

Light in the darkness

Perhaps the main purpose of a survey like this is to act as a signal. The widespread surprise, even indignation, at the fact that a significant minority of people do not possess certain elements of basic general knowledge shows that we all consider knowledge important. But why? Factual knowledge is clearly a precondition for thought. Perhaps we think - or hope - that accurate knowledge leads to rational behaviour or enables us to hold our own in a hostile world. After all, man is by nature a weak animal who has only survived thanks to his brains.

ledge survey like that conducted by EOS until the cows come home. Ultimately, however, most people will agree that certain basic knowledge about the planet on which we live is more important than knowing what a byte is or understanding the difference between alternating and direct current. Perhaps it is also important to know something about the universe, our solar system, the planet on which we live and Darwin’s theory of evolution, as this will arm us against fanaticism and superstition. That is why it is so important that the Flemish government keeps up its efforts to popularise science, as embodied in the Science Information and Innovation Action Plan60. Because this may encourage people to pursue a career in science. Because interest in science boosts inventiveness and because the knowledge society is Flanders’ future. But above all because an informed individual thinks more critically. And because science brings light in the darkness.

Bart Dumolyn Entrepreneurship, Science Popularisation and International Cooperation Team (with thanks to Peter Bakema for fruitful discussions)

I have expressed the hypothesis that, although the overall amount of factual knowledge possessed by young people has not declined, the ‘greatest common divisor’ in knowledge terms has apparently shrunk. This may be related to the shift from a knowledge-based to a skills-based emphasis in schools. But are there things that everybody in our society simply ought to know? And if so, who decides what those things are? And why should that be necessary? There are indeed things that it is important for everyone to know. We can discuss the arbitrary nature of a know-

58 http://adam.cascade.be/eos/NieuwtjesPopup.aspx?id=451182 59 See http://ec.europa.eu/public_opinion/archives/eb/eb67/eb67_en.htm 60 Find out more about the Science Information and Innovation Action Plan at www.ewi-vlaanderen.be

50

EWI 3 ENG.indd 50

03-01-2008 13:54:50

Do you need more info? Do you want extra copies or do you want to subscribe to EWI Review? Surf to www.ewi-vlaanderen.be/review or contact us by email [email protected]

51

EWI 3 ENG.indd 51

03-01-2008 13:54:58

Flemish government Department of Economy, Science and Innovation Koning Albert II-laan 35 bus 10 1030 Brussels, Belgium [email protected] www.ewi-vlaanderen.be

EWI 3 ENG.indd 52

03-01-2008 13:54:59