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European Commission

Johannes Hahn

Commissioner for Regional Policy

Speech: Making Croatia competitive with EU cohesion Funds
As Croatia's EU membership approaches, Commissioner for Regional Policy Johannes Hahn calls for a clear strategy for EU investments in growth and innovation

Zagreb, Opening speech at the Seminar on Smart Specialisation

12 February 2013

Dear Deputy prime Minister,

Dear Ministers,

Dear colleagues,

Ladies and Gentleman

Introduction - Innovation and Specialisation

Research and development, innovation and technological developments are often associated with the US and Japan. The Silicon Valley and Google are the first things that come to mind when looking for success stories.

However, Europe is no stranger to similar success stories of innovation and entrepreneurship.

The north-west corner of Europe, for example, has been a source of creativity and innovation and has some great products to show for.

The Nordic example

The operating system Linux was the first one. Its success laid the foundations for the specialization on open source programming in regions in Finland, Sweden, Denmark and Estonia.

One of the better known products of this process is Skype, which was recently bought by Microsoft for 8.5 billion US dollars. Another recent example is “angry birds”, one of the most successful franchise games for mobiles. I am sure this game is installed on some smartphones in this room today, but please do not start playing now!

Rovio, the company behind “angry birds” was evaluated at 9 billion dollars. Some estimates show that Linux is valuated at least 25 billion dollars.

The Cypriot example

In the south-east corner of the EU, another innovation, this time in services, was equally successful. Cyprus taking advantage of its strategic position, and building on its long tradition in shipping, developed a holistic and specialized service for ship-management.

Today Cyprus is the largest ship-management center in the European Union, and one of the largest in the world. Ship-management accounts for 4.5% of the Gross Domestic Product of the country.

These are just two examples of success stories of innovation and specialization in Europe. I hope that Croatia will be able to identify its own unique selling-proposition and built its smart specialization strategy around it. I hope that this event today will pave the way for Croatia’s success story.

Evolution of Structural Funds – An investment Policy

Dear friends,

Ladies and gentlemen,

Croatia's accession to the EU is fast approaching. Preparations in Zagreb, Brussels, and the Member States are in full swing.

You are joining the EU at a time that we are preparing for the fifth generation of Regional Policy. At the beginning, back in 1989 the objective was to simply transfer funds to the poorer regions.

In today's economic global environment competitive forces and resource constraints are the key considerations.

Adapting to these evolving needs, Cohesion Policy has developed over the years. Today it is the Union's main investment arm. It has a central role in fighting the crisis and putting Europe and its regions on the path of sustainable growth.

Increasingly, the emphasis of Regional Policy is on supporting small and medium size enterprises, creating centres of excellence and clusters for research and commercialisation of their results.

This is reflected in the outcome of the negotiations between the Member States last week concerning the multiannual budget of the Union from 2014 to 2020. Cohesion Policy was one of the policies least affected by the cuts.

The shape of the new budget means that Regional Policy will be by far the most important source of investment funds in a range of areas including innovation and support to enterprises.

More than ever before, in the new period, Regional Policy will be designed to support growth and jobs, and help Europe's regions stay globally competitive.

Ex-ante conditionalites and RIS3

Today's Cohesion Policy is designed to build in the lessons of the past.

One of the new elements we have proposed for the new period is to put in place ex-ante conditionalities. As the name suggest, these are conditions that have to be fulfilled before spending any funds in specific fields. Conditions that ensure that investments from Regional Policy are efficient and effective.

A Research and Innovation Smart Specialisation Strategy is one such pre-condition.

It is a requirement we are putting on all Member States in order to ensure that the right conditions underpin research and innovation actions. For every project selected and every euro spent. To guarantee that all fit into a carefully-thought out and well-designed strategy.

The strategy will help to establish the necessary coherence in the goals of the main stakeholders. Government policy and research at universities will better reflect the needs of the enterprises and of the region.

Under these conditions, support from Structural Funds becomes an effective investment in the region. They contribute to competitiveness and prosperity, fostering sustainable growth and jobs.

Of course not all the regions can become the new Silicon Valley. When we talk about innovation we do not just mean information technology and test tubes. Innovation can be about a new approach to any product or service. It can be about applying new business models and practices. You can innovate in agriculture, in bio-products for example. And you can even innovate by specialising in agro-tourism.

R&D as a motor of growth

Allow me here to pause for a moment to underline the importance of research and innovation in Europe and its regions.

Spending in research and development is known to be positively correlated with levels of economic growth.

However, the EU as a whole is lagging behind its main global competitors with research and development spending accounting only for 1.8% of its GDP in 2008. This is well below the US which had 2.8% and Japan which had 3.3%.

That is why research and development is at the heart of Europe 2020, the Union’s long term growth strategy.

What does this mean for Croatia?

Dear friends,

Ladies and gentlemen,

What does all this actually mean for Croatia?

First of all Croatia has to commit itself to increasing its research and development budget which in 2010 stood at 0.7%.

But while you do that you must also develop the necessary conditions for the spending to be efficient and have an impact.

The first thing you have to ask yourselves is what is the unique selling proposition of your regions? How can you take advantage of it and how can you develop it further through innovation?

I urge you to think with a global perspective. How can you develop your distinctive advantage and export it to other regions in Europe and beyond?

Developing your Research and Innovation Smart Specialisation Strategy will help you focus and identify the sectors with the highest potential for growth and global competitiveness in your country.

The Strategy will lay the foundations of an inclusive process involving the key stakeholders, universities and enterprises for the development of your policy. It will mobilise and bring together the different governmental departments helping to ease bureaucratic obstacles and joining different policy objectives.

A much better approach than simply supporting unrelated individual projects that have no synergies nor an impact on the industrial and economic structure of region.

The European Commission presented its position paper for Croatia on 31th January. It proposes that you should identify a set of innovative and high-growth sectors that would strengthen the competitiveness profile of the country.

Stimulating the debate

While this is only the beginning of the process I would like to stimulate the debate by suggesting areas in which to my humble opinion, your country has a distinctive advantage and potential for sustainable growth.

Croatia is a beautiful country with abundance of natural resources and strong green credentials. I was pleasantly surprised to find out that Croatia, in terms of bio-energy, is already at the EU average. As I understand it “bio” seems to be the buzz word in the country. There appears to be big potential for developing the bio-energy, bio-technology and bio-health sectors.

Perhaps these are sectors you should focus on. Your distinctive proposition, not only to Europe but further afield.

Croatia is strategically positioned at the heart of the Western Balkans, Danube and Adriatic regions. You are very well placed to develop international clusters and research and development excellence centres with the countries and regions around you.


I look forward to today’s discussion. I would like to conclude by underlining once more that Regional Policy is an investment in your enterprises, your human and natural capital and for your research and development. It is an investment in growth and jobs in your regions. As the Vice Prime Minister has said, Cohesion Policy funds will account for 70% of your country’s development budget in the years ahead. What a contribution! The European Commission will be your committed partner – whatever specialisations you choose to pursue.

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