wiiw warns EU-CEE countries, including Romania, need innovation to exit middle-income trap
<p>The Central and Eastern European EU members (EU-CEE) have undergone an impressive process of economic catch-up since the early 2000s, but the previously successful model of taking over labour-intensive production steps as an ‘extended workbench’ for Western companies is increasingly nearing its limits and the countries need a new industrial policy worthy of the name to exit the middle-income trap, according to a report published by the Vienna Institute for International Economic Studies (wiiw).</p>

<p>Such a European-coordinated industrial policy, tailored to the specific needs and strengths of each country, can only succeed with technological innovation, the wiiw report furthers.</p>

<p>The study recommends that the EU-CEE member states take a number of steps:&nbsp;</p>

<p>- create&nbsp;<strong>a long-term innovation strategy</strong>&nbsp;and a national agency to coordinate all innovation efforts;&nbsp;</p>

<p>- make better use of EU funds and increase national funding for research and development;&nbsp;</p>

<p>- improve administration and public institutions;&nbsp;</p>

<p>- promote local suppliers, introduce targeted incentives for R&amp;D and, above all, e<strong>ncourage the better networking</strong>&nbsp;of domestic companies with foreign corporations to establish industrial clusters in promising areas;&nbsp;</p>

<p><strong>- selectively target foreign direct investment&nbsp;</strong>in sectors that align with their own existing industrial strengths;&nbsp;</p>

<p>- and create incentives for foreign companies&nbsp;<strong>to conduct more research locally</strong>.&nbsp;</p>

<p>In this respect, the study advocates moving away from a reliance mainly on tax incentives for increased R&amp;D expenditure to include more grants and even state subsidies.</p>

<p>In addition, the study recommends strengthening universities and research institutions and linking them with industry – for example, by tying funding for companies to cooperation with scientific institutions. There is also a need to accelerate the training of a sufficient number of highly qualified specialists in natural science subjects; to facilitate the immigration from abroad of such personnel; and to improve financing conditions for innovative companies</p>

<p><em>EU-CEE countries include Poland, Czechia, Slovakia, Hungary, Slovenia, Croatia, Romania, Bulgaria, Estonia, Latvia and Lithuania.</em></p>

<p><em>iulian@romania-insider.com</em></p>

<p><em>(Photo source: Dreamstime.com)</em></p>