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Slovenia - RIO Country Report

RIO Country Report Slovenia 2015

The annual RIO Country Report offers an analysis of the R&I system in Slovenia, including relevant policies and funding, with particular focus on topics critical for EU policies. The report identifies the main challenges of the Slovenian research and innovation system and assesses the policy response.

R&I Challenges
Better coordination and streamlining of the R&D and innovation policy
Challenge description: 

In 2014, the Council suggested that Slovenia should "Streamline priorities and ensure consistency between the 2011 Research and Innovation and the 2013 Industrial Policy Strategies with the upcoming strategies on Smart Specialisation and Transport, ensure their prompt implementation and assessment of effectiveness."

In its attempts to find the most efficient distribution of tasks among the different ministries in 2012, the Slovenian government decided to move the technology section from the Ministry of Higher Education, Science and Technology (now MESS – Ministry of Education, Science and Sport) to the Ministry of Economy, which became the Ministry of Economic Development and Technology (MEDT). Although this separation can be found in many countries with well-functioning R&I systems, the specific problem with moving the technology section is that it requires a certain transition period before it becomes fully operational again.

The shifts in the structure of the R&I resulted also in delays in the implementation of the “Research and Innovation Strategy of Slovenia 2011-2020” (RISS). The document was partially dismissed after the 2011 early elections and revived again in 2013. One of the key priorities of the strategy was the "establishment of an effective common governance system for the research and innovation system, involving all stakeholders". RISS puts forward as a measure in this respect the "[f]ormation of a uniform Government advisory body – the Council for Research and Innovation will replace the Council for Science and Technology and the Competitiveness Council", which requires a change in the Law on R&D (see below). The RISS, the Industrial Policy Strategy (2013) and the National Programme on Higher Education (NPHE) were taken into account when drafting the Smart Specialisation Strategy, but the latter was submitted to the European Commission only in July 2015 and approved in November 2015, which has caused delays in making the planned measures operational and publishing new calls.

Policy Response: 

The establishment of a Council for Research and Innovation is somehow delayed if not left apart for the time being. The Government Office for Development and European Cohesion Policy (GODC) was re-established in March 2014, whose primary task is to speed up the preparation of the necessary national documentation for the EU structural and cohesion funds, including the preparation of the Smart Specialisation Strategy. After two unsuccessful drafting of RIS3 in November 2013 (prepared by MEDT) and August 2014, GODC published an open call to RDI communities to submit proposals for the entrepreneurial discovery process. The RIS3 draft received 170 proposals and was discussed in a specific conference with more than 400 participants. On the basis of the discussion and expressed interests, the GODC is planning to identify strategic partnerships, which would focus on priority areas. GODC is developing the implementation process as well as coordination mechanism in cooperation with other ministries and responsible agencies.

With regards to the coherence of the strategic documents, 2015 National Reform Programme (NRP) insists that "The Research and Innovation Strategy of Slovenia (RISS) from 2010 and Industrial Strategy Policy (SIP) from 2013 are mutually harmonised, while their objectives (introduction of excellence and competition at the international level) are completely included in the Smart Specialisation Strategy".

The proper implementation of the RISS and NPHE calls for two legal acts to be adopted: the Law on Research and Development (R&D) and the Law on Higher Education (HE). The initial idea was that they reflect the interconnectedness of research and innovation and deal with the financing of research at university level and suggests higher level of autonomy in internal distribution of research funding, especially of so-called institutional block-funding for research at HEIs. The two acts were drafted by the previous government, but in May 2015, the newly-appointed Minister of Education, Science and Sports stated that new drafts of the two key laws are to be prepared by late fall 2015 for public discussion. Apart from the preparation of these two laws, no major policy action has been put in place since 2011. Each ministerial team had different views on the implementation of RISS and the content of the key legal documents, but fell short of adequately completing the policy changes.

Policy assessment: 

Although the Slovenian R&I system seems to function rather well compared to other similar economies, the streamlining of its strategic priorities and coordination between the actors in the governance system could further be improved. As stated by the new government, there is a policy commitment that would help push through the necessary steps to adopt the two laws and start implementing effectively existing and new strategies. Setting up widely agreed national R&I priorities would certainly better bring about policy continuity and guarantee succession of instruments and measures deemed valuable for the system. Indeed, what is important in the long run is to put in place sustainable governance mechanisms which will allow having predictable outcomes from the implementation of the strategic documents.

Maintain the sustainability of the level of R&D financing
Challenge description: 

In 2010, the government adopted a target of 3% of GDP for joint public and private sector investment in R&D by 2020. Through the adoption of the RISS 2011-2020 (2011) Slovenia set a more ambitious national target of 3.6% (of GDP) of R&D intensity to be achieved by 2020. Already higher than the European target (3%), it was re-considered and referred to as 3% in the National Reform Programmes (NRP) of Slovenia as of 2011 (including the NRP 2015) onwards to better reflect the economic and financial situation. Even though the total R&D expenditure rapidly increased in the period 2008-2012 both in nominal values (2008: €616.9m; 2009: €656.9m; 2010: €745.9m; 2011: €894m; 2012: €928.3) and as percentage of GDP (2008: 1.63%; 2009: 1.82%; 2010:2.06%; 2011: 2.42%; 2012: 2.58%) in 2013 GERD stalled at the level of the previous year €935m (2.6% of GDP) and provisional data reveal it decreased in 2014 – €890m (2.39% of GDP).

Despite the fact that R&D investment by business sector indicates an increase in 2013, its rate of growth slowed down compared to previous periods. On the other side provisional Eurostat data clearly show that public efforts in R&D funding are lessening: appropriations for R&D in the government's budget (GBAORD) were even less in 2014 (€182.7m) compared to 2008 (€189.6). Taking into account budget revisions the government reduced considerably the funding for research, which is even more noticeable in the GBAORD expressed as a share of the total government budget. In fact, Slovenian GERD funded by the government had been increasing both in nominal values and percentage until 2011 when it reached its peak (0.76% of GDP; €281.8m) and then started to decline (2014: 0.52% of GDP; €193.9m). A minimal increase is planned for the MESS budget for research in 2016/17.

The budget adjustment will lower the level of financial support to R&D in PROs and HEIs. They adapt to the situation "by cutting the investments in research infrastructure and to certain extend also in labour force". This could entail risks like lower level of public-private cooperation and competitiveness capacities. It is likely also to affect the business sector, although the latter could compensate by the use of indirect support from the government (R&D tax incentives). Slovenian R&D tax incentive system is considered very generous: since 2012, it has been equal to 100% of the amount invested in internal R&D activities and purchase of R&D services and to 40% of the amount invested in equipment and intangibles (Ministry of Finance). According to OECD, direct government subsidies to businesses in Slovenia accounted for 0.27% of GDP and R&D tax incentives for 0.09% in 2012, which amounts to €32m (1/4 of the total governmental support to the business sector). Other sources mention even greater use of the indirect support scheme by the business sector (IMAD's Development Report 2014 states that the amount of the R&D tax relief claimed in 2012 was €184m).

Although business R&D expenditure nominally slightly increased in 2014, BERD intensity decreased for the first time in years. Innovative SMEs are supported by two national funding instruments: the programmes of the Slovenian Enterprise Fund (SEF) and the credit line of the Slovenian Export and Investment Bank SID. SID provides financing of and guarantees for bank credits to SMEs' investments in R&D&I. Venture capital (VC) companies are starting to be more active in Slovenia, but the VC per GDP is at the bottom of the OECD middle range. The government does not provide favourable treatment of VC and/or business angels any more.

Policy Response: 

There were several financial instruments for SMEs, many of which co-funded by EUSF 2007-2013, but both main public funding programmes (MEDT and MESS) reduced their R&I budgets and only few remained active due to the end of the programming period and budget austerity measures. Under the current budget constraints the funding from abroad started playing a bigger role in the funding mix. More than 9% (2014: €83.3m; 2013: €82.5m; 2012: €79.5m; 2011: €62.8m; 2010: €44.8m; 2009: €39.7m; 2008: €34.5m) of the total GERD in 2014 (provisional data, last available year in Eurostat) came from abroad with the inflow of European funding (EUSF and FPs) accounting to more than 46% (2013: €38.7m; 2012: €36.3m; 2011: €30.2m; 2010: €24.9m; 2009: €20m; 2008: €17.3m) of the whole international R&D financing. The government acknowledges the importance of the European Structural and Investment (ESI) Funds and made efforts for the Smart Specialisation Strategy and operational programmes to be adopted, so that NIS could start using the available amounts for 2014-2020 period. According to the NRP 2015 "In 2015 and 2016, attention will be paid to connecting and seeking synergies between structural and investments funds, and Horizon 2020". The RIS3 was finally approved in autumn 2015 and new measures and instruments are to be announced in spring 2016 for the 2014-2020 period. Based on the evaluation of the support measures by the former Ministry of Economy for the 2004-2009 period, the need to provide more systematic and harmonised support was stressed with emphasis on the requirement of avoiding frequent changes in the types of measures. The government recently reaffirmed its intentions to support SMEs through creating favourable business environment by using the support of ESI funds.

Also, the Slovenian government is focusing on a transition from grants towards repayable funding (guarantees, loans and equity financing), especially for promoting the investment project of enterprises, in order to achieve leverage and a revolving effect.

Policy assessment: 

The lack of continuity in several support measures lead to instability in the R&D funding and caused serious problems in the R&D activity of PROs and HEIs. With the slow progress in the preparation of Smart Specialisation Strategy it is unlikely that 2015 will bring any new financing through instruments potentially developed for the structural funds of the financial perspective 2014- 2020. It is too early to speculate on how the reduced direct government support for R&I has affected the business sector’s investment, since it relies more on the tax incentives. The Ministry of Economic Development and Technology and the Ministry of Education, Science and Sport have experienced significant cuts in funds aimed at support of technological projects in the last years, which gives indications the budget constraint are not solved yet. On the other hand, the R&D performers realised they have to look for alternative funding sources, mainly from abroad, which lead to an increased interest to and absorption of European funds. This opinion can be supported by the collaborative approach of the Slovenian researchers as they have actively participated in the Framework Programmes from FP5 on, with each following one increasing both the number of participation (914 in FP7), number of coordination projects (55 in FP7) as well as the EC contribution (€170.8m in FP7). The numbers can be considered as a reflection of relatively intensive international research collaboration of Slovenian R&D units, both PRO and SMEs. However it still remains unclear whether the inflow of ESIF (rough data from the new Operational Programme 2014-2020 estimates the support to R&D to €461 million) will manage to compensate the R&D budget cuts. In addition, the repayable sources were not welcomed so far and also used only very conservatively by SMEs. A firm policy commitment made by the government is in place, but the progress in the implementation of the different instruments remains to be seen.

Improve the links between R&I investment and performance
Challenge description: 

Innovation Union Scoreboard 2015 ranks Slovenia among the "innovation followers" (12th), which according to the methodology used, indicates above or close to EU average performance. Especially when it comes to "enablers", the country progressed in all indicators, with only one exception – the low level of R&D expenditure in the public sector (already mentioned in challenge 2). When applying the approach used by Edquist and Zabala-Iturriagagoitia, Slovenia ranks 7th in EU28 in terms of R&I input, mainly due to the high BERD.

On the other hand, as far as output indicators are concerned, several weaknesses are observed in: license and patent revenues from abroad, sales of new to the market and to firm innovation, knowledge-intensive services exports. Edquist and Zabala-Iturriagagoitia rank Slovenia 18th in terms of innovation outputs and goes even further stating that in terms of productivity (innovation performance) the country holds 25th position.

This is somehow in line with the way the country performs in another ranking – the Innovation Output Indicator. Although Slovenia ranks the middle range, there is a deterioration in 2012 (87.42), compared to the previous year (90.3) and the country slid a position back to rank 14th in EU28.

Policy Response: 

Slovenia adopted a number of strategic documents, dealing with different aspects of this challenge, but it is not yet addressed at policy level in a comprehensive manner. With regards to the promotion of knowledge transfer as a driver for economic growth, several instruments have been put in place. The RISS (2011) includes important measures to help commercialising research results and value added (e.g. the policy area of "knowledge transfer and poles" received the majority of ERDF in the previous funding period), but its implementation lags behind for several afore-mentioned reasons. The Industrial Policy Strategy (2013) focuses more on entrepreneurship and technological innovation. In the national operational programme of Slovenia several output indicators were chosen to evaluate performance. The Smart Specialisation Strategy approved in autumn 2015, already quite a comprehensive document, is expected to bring about a better focus of the R&I investments and more clear prioritisation. The key Smart Specialisation Strategy objectives are raising the value added per employee, increased share of high-tech intensive products and knowledge-intensive services, and increased entrepreneurial activity. The synergy between them will seek to direct the funding towards selected areas thus boosting the quality of research investment and creating economic impact.

Policy assessment: 

Despite the increased investment in R&I, the IUS findings remained almost unchanged during the last years. Slovenia did not progress in the overall ranking over the last years (since 2008, when it joined the group of "innovation followers"). Although there is a certain time lag between investing in new knowledge and performance it is clear that Slovenian NIS needs to further improve in some areas. In some others it already showed considerable improvement - i.e., scientific publications among top 10% most cited where Slovenia is on the right track and improved its performance by 5.9%. External evaluations of strategic documents and the R&D system were commissioned in the past, which is a good practice to assess the positive/negative characteristics of the system and make recommendations. This contributes to the fine-tuning of measures and instruments and seems to be a good way forward to maintain dynamism and further improve the performance of the NIS.

Chapters
1. Overview of the R&I system

The Slovenian R&I system is quite complex, it is centralised and its financing is executed mostly on a competitive-basis. The most important players in the field are two ministries (Ministry of Education, Science and Sport and Ministry of Economic Development and Technology), entitled to promulgate relevant documents and policy measures, but also to co-finance projects, mostly indirectly (MEDT through SPIRIT, MESS through SRA). The main RDI funders are the business and government sector – where the business funds play an increasingly more important role in the last eight years.

The R&I system of Slovenia is characterised by high intensity, especially compared to other Central and Eastern European countries. Despite the budget cuts in the public R&D support in recent years, Slovenian gross R&D expenditure reached €935m (2.59% of GDP) in 2013 (€928m and 2.58% of GDP in 2012). This is mainly due to the business R&D expenditure which was increasing over the years, starting from €242.9m in 2005 to reach €715.5m in 2013. The share of the abroad funding was almost 9% in 2013. In spite of high investment in RDI by business sector, additionally stimulated by the R&D tax subsidy, the overall investment in R&D declined in 2014 to 2.39 % of GDP.

2. Recent developments in research and innovation policy and systems

Recent key developments in the R&I system include:

  • Smart specialisation strategy was approved by the Government on 20th September 2015 and by the European Commission in November 2015.
  • Drafting of the new Laws on Higher Education and on the Research and Development.
  • Operational Programme 2014-2020 approved in December 2014.
3. Public and private funding of R&I and expenditure

RDI expenditures were partly determined by the austerity and fiscal consolidation measures. On the one hand the state decided to foster private investments by the tax relief, introduced in 2010 and expanded in 2012, while on the other hand the figures show that the public funding for RDI has been decreasing sharply. In 2014 it stood at the level of 0.55 % of GDP. From 2011 onwards most of the measures for innovation have been discontinued, while some programmes that were important in the field of R&D were minimised or partially-dismissed. The decrease in budget outlays for RDI has effected significantly also the conduction of RDI in public and private enterprises.

4. Quality of science base and priorities of the European Research Area

The Slovenian R&D activity is visible also in the increased number of scientific publications. The ERA priority of optimal transnational cooperation and competition was pointed out as one of the key priorities of the Slovenian RDI system already in RISS 2011–2020. However, in terms of top 10% most highly cited publications, Slovenia lags behind EU average. Slovenian labour market for researchers remains relatively closed due to internal restrictions (e.g. Slovenian language as a prerequisite for scientific work in the public sector). At the same time, universities in Slovenia have established career counselling centres.

5. Framework conditions for R&I and science-business cooperation

Several instruments have been put in place in Slovenian RDI system to promote knowledge transfer, including the establishment of special institutional set-up, such as centres of excellence and competence centres, where cooperation between public sector research organisations and business sector are encouraged.

Slovenia performs well in several knowledge transfer related indicators. The lack of human resources has not been identified as a problem in entrepreneurship in Slovenia, although entrepreneurial training is not sufficiently emphasized in curricula. There was a stand-alone measure targeting intersectoral mobility, but no calls were published the last two years.

Slovenia provides seed capital to young innovative ventures. In 2015, several different measures existed, depending on the business stage of the project.  The "second chance" after failure is not a common practice in Slovenia.

6. Conclusions

Due to several factors, most of the challenges to the Slovenian RDI system remain unchanged, only more expressed. The three identified challenges put forward in the executive summary are summarised in the conclusions. The chapter lists relevant policy actions, assesses their appropriateness, efficiency and effectiveness, and provides links to relevant evidence (based on evaluations or empirical analyses).

Geo coverage
Report year
2015
Country Report file
Official publication date
Tuesday, 3 May, 2016
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