Towards Smart Growth: Remarks by Tony Verheijen at 2017 Kopaonik Business Forum
In my remarks, I would like to dwell on a few issues that we believe are pertinent to achieving smart growth, education, strengthening research and innovation, and enhancing Serbia’s capacity to evolve into a digital society.
What is smart growth?
Smart growth means improving performance in: education, by encouraging people to learn, study and update their skills; in research and innovation, by creating new products and services that generate growth and jobs and help address social challenges; in digital society, by using information and communication technologies.
By pursuing these improvements, countries aim to develop as a sustainable and inclusive economy. The key elements of this approach also constitute key policy objectives of the EU, for the Union as a whole and for its Member States, and are also subscribed to by Serbia.
This approach also squares with one of the two overarching objectives of the World Bank: eliminate poverty and promote shared, i.e. sustainable and inclusive, prosperity.
How is this relevant to Serbia and how can the World Bank help?
The first element is education.
Serbia’s population is one of the fastest-shrinking in the world, likely to decline by almost 17 percent between 2015 and 2050, due to low fertility rates. The demographic shift occurring in Serbia has a profound effect on the education system. While the demographic decline is not unique to Serbia, it presents an opportunity to address inefficiencies and challenges which have emerged. The opportunity exists for policy makers to: revamp preschool education with preschools that develop skills that are required for the 21st century in a learning by playing environment; to reform an antiquated and obsolete model of secondary education (in particular, the large number of redundant TVET profiles); and increase transparency and accountability in primary and higher education.
The World Bank has been working with the Government of Serbia to improve education for many years.
Together, we have identified the following four broad goals.
In preschools, Serbia needs to improve the quality of preschool education by adopting the new law on curriculum, establishing new architecture guidelines for preschools, and reforming the law on universities to allow for changes in preschool pre-service teaching. In basic education, you need to consider piloting report cards for primary and secondary schools. In secondary education, you need to shift the emphasis from Technical and Vocational Education and Training (TVET) to general secondary programs, close redundant TVET profiles and invest in a select number of dual education streams. And, in higher education, Serbia needs to introduce transparency tools starting with disclosing data.
Currently, the World Bank is supporting a functional review of the pre-university education sector. This review aims to provide advisory services on reform options, best practices, and priority actions to improve the structure and functions of the Government of Serbia. The World Bank has also approved financing for an investment project to expand access to early childhood education and care (ECEC) services and support parents and young children from vulnerable backgrounds.
The state has an important role to play in developing and financing education policies that foster improved access, learning outcomes, and adaptable skills. Students enrolled in preprimary programs and general education require a strong foundation of cognitive skills that can lead them toward the futures in the dynamic economies of today and tomorrow.
The second element is research and innovation.
Serbia’s unemployment rate remains high at 13 percent, but it has fallen from its 2014 peak of approximately 24 percent. Serbia’s youth unemployment rate is estimated at 32 percent, down from 51 percent in 2012.
Importantly, the net increase in the number of employees has come from the private, formal sector. Around the world, too, global poverty reduction following the 2008-9 global financial crisis has been led by economic growth centered on strong contributions from the private sector.
In the global knowledge economy, growth depends on being able to bring the results of innovative research to markets, and enabling IT entrepreneurship.
Experience in supporting entrepreneurship has shown that an ecosystem approach is necessary for lasting results. In other words, supporting only the skills-building programs, or focusing solely on more and better financing for innovation, leads to unsustainable outcomes. If more IT entrepreneurs are trained but the business environment is unfavorable, these newly trained skilled workers are likely to emigrate abroad instead of starting and growing businesses locally. If a financing grant scheme for startups is deployed without appropriate mentorship and networking, the money will be spent but the potential to propel a company into new markets may not be realized. And with financing and skills, but without effective research and development capacity in the country, entrepreneurs will likely tend toward copying innovations generated abroad.
With assistance from the World Bank, Serbia adopted the Research for Innovation Strategy in 2016, and we have recently formed a support team consisting of government and World Bank specialists to boost IT entrepreneurship in the country.
Expansion of the private sector is also a key priority for the Serbian government. In this context, the government marked 2016 as the “Year of Entrepreneurship,” following adoption of the SME, Entrepreneurship and Competitiveness Development Strategy for 2015-2020. This has entailed centralizing information about entrepreneurship support programs in a single online platform, but more needs to be done.
Serbia’s research and development (R&D) institutions are home to talented researchers with astonishing results. Whether they are working on new technology to better cork fine wines for global markets, or using butterfly dust to increase security of banknotes, these innovators need better access to resources, including global knowledge networks, and financial support, better connections to markets and global value chains, and better support for commercializing their inventions right here in Serbia.
This requires shifts in resource allocation within the sector. Too large a portion of the current financing, approximately 100 million Euro per year, still goes to keeping non-productive researches in jobs, instead of supporting ‘winners’, particularly among the young researchers.
Through the Serbia Research Innovation and Technology Transfer Project, and the Competitiveness and Jobs Project, the World Bank is working with the Government of Serbia to modernize the research and development system, and bring Serbia’s R&D institutions into the 21st century.
The first step in this process is conducting an independent expert evaluation of R&D institutes in Serbia in 2017.
Information on strengths and weaknesses of the existing system is necessary for developing a new model of financing research in Serbia. The current, purely project-based financing model, distributes the relatively small state R&D budget in equal parts to all researchers, resulting in individual amounts that are often too small to meet any researchers’ needs. According to European and international best practice, this system should be replaced with a performance-based mix of institutional and project financing that incentivizes collaboration with the private sector and closely monitors economic and societal impact of research. At the same time, the new financing model must also ensure making long-term investments into the complex and fundamental areas of basic research.
The World Bank is supporting the Government in developing a national Research Infrastructure Roadmap which is meant to guide future investments in this area and to ensure the relevance of these investments for the economy and at a regional and even EU level, and we stand at your side as a long-term partner working to modernize Serbia’s research sector.
In addition, we are working to identify reforms and actions to help Serbia’s IT entrepreneurs use their talents to help boost the economy.
The third element is digital entrepreneurship as a focus area.
Serbia’s digital entrepreneurship ecosystem is still nascent, but it has grown significantly over the past decade. The highly skilled IT professionals educated here hold great promise for Serbia in an economic sphere of utmost importance for the world economy. SEE ICT, a local non-profit organization focused on supporting entrepreneurship, estimated a 750 percent increase in the number of tech startups registered in the country between 2011 and 2014. The digital entrepreneurship community is estimated to be around 2000 individuals and about 40 to 70 startups, with many more companies that are better established as SMEs in local and global markets. This exceeds estimates reported in the media based on statistics collected by the Serbian Business Registers Agency, suggesting that early-stage digital enterprises may not be fully captured by official surveys.
Unsurprisingly, the two major hubs of activity are Belgrade and Novi Sad, followed by Nis. The grassroots community is led by numerous groups such as the StartIT network, ICT Hub, StartLabs, SEE ICT, SEVEN, Serbian Private Equity Association, Science and Technology Park and Incubator, and the Serbia Innovation Fund, to name but a few. These play a central role in supporting Serbian entrepreneurs and promoting the entrepreneurship agenda.
The digital entrepreneurship ecosystem is relatively active and dynamic as indicated by the sizable number of tech-related meetup groups and members in Belgrade. Although having only a few more listed groups than in Sofia, Belgrade has 5 times the number of group members in digital technology related meetups registered on Meetup.com, indicating strong demand for digital entrepreneurship in Serbia. There are 12,500 members across listed groups in Belgrade compared to 2,500 in Sofia. Software development or coding appears to be the dominant theme across the groups.
Recent analyses of the education, innovation and entrepreneurial ecosystem found a number of gaps that threaten to hamper realizing Serbia’s potential to create jobs and growth through innovation and entrepreneurship. Thus, in operationalizing the research for innovation strategy and the entrepreneurship strategy, Serbia must focus on achieving specific goals in four critical domains.
First, on improving IT, managerial, and creative skills, through: introducing IT, creative design, and entrepreneurship courses or extracurricular programs in schools; making available scholarships for IT entrepreneurship; building entrepreneurship and creative skills in IT graduates; increasing the number of non-degree IT professionals through short, formal and informal courses.
Second, boosting financing for innovation and entrepreneurs, by incentivizing private sector RDI activities, encouraging private sector investments through tax and other scheme, improving the regulatory framework for venture capital.
Third, supporting research excellence and technology transfer, by improving the model of financing public R&D, enabling access to research infrastructures, improving technology transfer and supporting joint business-academia projects
Fourth, improving the enabling business environment, and reducing anticompetitive behavior, through an updated competition policy framework, and encouraging better collaboration in the entrepreneurship ecosystem through ecosystem networks, incubators, accelerators.
Recognizing the crucial role of innovative research and digital entrepreneurship as key drivers of growth, the Government of Serbia and The World Bank Group have formed a support team to accelerate key initiatives, reforms, and investments to support Serbia’s innovators.
Thank you for your attention.