There are new trends in the sphere of innovations and inventions in Ukraine. The first one is that our talents receive help from foreign businesses. As a result, Ukrainian inventions become non-Ukrainian, but demanded. The second one is that Ukrainians started self-organizing, joining financial, intellectual, and time resources, and creating a commercial circulation of ideas in the domestic market. Thus, ideas are being useful and are registered in Ukraine. In this article The Day talks about current trends in the Ukrainian market of ideas.
TREND No. 1
“It is easier for a startup to survive abroad”
• Ukrainian government finances science at a mere 0.3 percent of GDP. Business support is needed
For two years in a row, Ukraine has been losing ground in the global ranking of countries’ innovation The Global Innovation Index, which is composed annually by the experts of Cornell University, business school INSEAD, and World Intellectual Property Organization (WIPO). In 2013, we ranked 71st out of 142 countries, sinking from past year’s 63rd. Thus, we ended up between Tunisia and Mongolia. At the same time, Ukraine is one of the innovation leaders in the group of 36 countries with medium and low income levels. This means that we have talents, but no ways to promote them.
“The compound parts of this rating give us an answer to the question why we are in such a situation now,” says Rostyslav PAVLENKO, head of the subcommittee on science and innovation activity at the Committee for Science and Education at the Verkhovna Rada. “Several very significant indicators are among them: we rank 87th according to the level of science management, 98th for the degree of infrastructure development, 101st – for the quality of legal and regulative framework. Besides, we have a law on scientific activity, which defines the lowest limit of science funding at 1.7 percent of GDP. But in reality, Ukrainian science receives approximately 0.3 percent of GDP. It equals to about four billion hryvnias per year, which is unacceptably little.
“In order to solve the problems reflected in these numbers, we must talk about three directions. The first one is financial, and it is not the only one, because mere funding of the system will not solve problems. If we talk about business financing, all developed countries have exemptions for businesses that finance research projects, universities, etc. There is also an organizational aspect. It is impossible to just finance a project, without keeping in mind the Academy of Sciences of Ukraine and its branch academies. Obviously, a balance must be reached. On the other hand, consolidation of project approach and transparency of funding must also be present, a lot needs to be done in those areas. According to some data, there are 40 priority directions in science in Ukraine, while Russia only has 8, and Germany 5. Which means we do a bit of everything. The problem is to apply all available resources more purposefully. Also, budget priorities need to be changed. There is a very telling chart which shows an increase of expenditure on government institutions and a plunge in the financing of science, education, and similar areas. I think that the state should redefine its priorities in the budget process. There are reserves for that.
“Collaboration with foreign universities is another important aspect of innovation and science development. Not a single branch of science can develop normally without it today. Experts think that soon Ukraine will have to swiftly adopt legislation on facilitating cooperation with European colleagues. In particular, research centers and universities should be allowed to independently manage funds they will receive in international projects. Ukraine cannot avoid the expansion of academic autonomy of universities in order for them to become more actively involved into the creation of scientific product. Also, researchers emphasize the necessity of lowering bureaucratic pressure and not allowing officials to manage university research activity.”
• “UKRAINIAN SCIENCE SURVIVES THANKS TO THE SOVIET SCHOOL AND ENTHUSIASTS”
Maksym STRIKHA, Doctor of Physics and Mathematics, head of the Public Council at the State Agency for Science, Innovation, and Informatization of Ukraine is very well acquainted with the deplorable state of modern science.
“According to all scientific and metric criteria, Ukrainian science should have died long time ago. Science can only play a certain role if it receives a certain amount of funding. This is confirmed by the data collected in many countries: the influence of science on economy is possible only when the government finances science at no less than 1.7 percent of its GDP. But if we look at the total funding received by the National Academy of Sciences of Ukraine, it is smaller than the total budget of Dynamo and Shakhtar soccer clubs. And at the same time, we must say that the efficiency of our science is 10 times higher than of that in the US. It is possible thanks to our heritage: we have excellent science schools, brilliant enthusiasts in universities and academies, and such legendary figure as Borys Paton. If not for him, the National Academy of Sciences would face the same fate in the 1990s as the Black Sea State Shipping Company (SSC), which used to be one of the largest in the world.
“What are our strong points? We still have good fundamental science: it is even leading in a number of areas. And if we still manage to have resources for fundamental results, research and development projects require much more money in order to bring an invention to the prototype stage. Here, the situation is more complex. Everything depends on economy. We have a very peculiar low-level economy, functioning in the conditions of a corrupt state where many economic ‘leaders’ do not show a slightest bit of interest in projects that do not instantly bring 50 percent of profit.”
The activity of Borys RASSAMAKHIN, professor at the National Technical University “Kyiv Polytechnic Institute,” can be a good example of how Ukrainian science is developed by enthusiasts. He has been working on the creation of a nano-satellite for 4 years in a row with a group of 15 enthusiasts (students, postgraduates, teachers). Currently, the development of space science in this university is not financed. The government assigned 100,000 hryvnias for the first year, and has been rejecting further financing for two more years, since allegedly there are no allocations earmarked for this in the budget. This year the team is planning to finish the project by involving funds from foreign investors.
“During this time we have created the ground part of the nano-satellite, now we are finishing the space part, the one that will be launched into space. Basically, it is a robot that will be operated from the Earth, it will perform all operations that large satellites perform,” explains Rassamakhin. “We solve three problems here: educational (by teaching students), scientific and research activity (by studying the tasks which science sets for us), and technological (by checking the University’s capabilities in a flight experiment).
“Our specific feature is that we develop technologies, instead of buying them. A number of European universities has already become interested in our products: navigation systems, solar sensors, thermal components, engines, pipes. Now we are working with foreign investors to receive funding for research in outer space, because we have already carried out all the experiments on the Earth. I can cite an example of our colleagues from Estonia, who received four million euros in four years for similar needs.”
Ukrainian scientist and robot designer Dmytro DZIUBA learned not to rely on the Ukrainian state or business. He has ideas and projects of robot design. He plans to launch them into production in China.
“It is not that easy to organize something in Ukraine because of our specific tax organization, entrepreneurship registration, etc. It does not motivate to work, because you have to start from scratch in Ukraine. But you can easily do it for less money and with better quality in another country. For example, in China,” Dziuba says.
Scientists think that it is impossible to reform science without increasing its funding. In order for science to start influencing economy in some way, some priorities must be chosen, areas where we can produce something and bring this product into the market. Support programs must be created.
“Worldwide it is called an innovation system,” Strikha says. “If we do have science in Ukraine, we have no innovation system at all. We had a single more or less successful islet of innovation: technology parks. They managed to make some profit for the budget on the basis of a few good technologies. But the government killed them in 2010. Also, the possibility of venture credit is absent in Ukraine: people who invest in something absolutely new take risks, and there must be mechanisms to cover these risks. The tragedy is that we have science, but we do not have connections between science and business.”
Specialists of Microsoft, the company that has been supporting innovative projects for several years, say that Ukraine has plenty of ideas: according to their estimations, we have about 100,000 developers and programmers.
“An innovation is an implemented idea, and a successful innovation is an implemented idea that has been adapted and put to use. We are lucky with ideas: we have plenty of students, researches, scientists who create unique innovations. But how can an idea be brought into life? It is so much easier for startups to survive abroad, and they move abroad to implement their projects. There is a number of reasons for that, all of them have already been discussed,” says Viktor TSYKUNOV representative of Microsoft Ukraine. “What should be done for an innovation to be implemented in Ukraine? We need support both from the government and the Ukraine-based business. I think that if every business invests in innovations support in Ukraine, we are going to rise.
“Experts agree that fundamental science (academies, universities, institutes) must be financed by the state. But if we talk about bringing a specific invention to mass production stage, it must be supported by business.”
By Oksana MYKOLIUK, The Day
TREND No. 2
“To join resources in order to create demand in Ukraine”
• An exchange opens in Donetsk where innovations will be sold
In order to develop Ukraine’s innovative structure Donetsk region suggests restructuring the national innovative development model into a chain of regional innovative systems and creating a global virtual site for communication between innovators and business. The Exchange of Business Assets, whose project was presented at the end of September in Donetsk, is likely to become this site.
The program was designed within the project “Favoring Economic Development and Employment” implemented in Ukraine by the German Society for Economic Cooperation (Deutsche Gesellschaft fuer Internationale Zusammenarbeit (GIZ) GmbH). According to the designers’ definition, the Exchange of Business Assets is the electronic site for trading business assets, where investors and innovators will be able to communicate with each other and sign contracts using the services of authorized consultants, brokers, and arbitration.
The project is very ambitious, the authors’ suggestion is to commercialize the innovations and business ideas which nowadays is the necessary condition for the economic development. “Our goal is to establish communication between the parties of the innovation process, create an organized innovations market and preconditions for standardization and certification of innovative products which do not exist in Ukraine,” Yaroslava Tulku, creative director of the agency CI&PR emphasized.
The designers of the project suggest five levels of presentation at the Exchange: a business idea, a business plan, a startup, ongoing business projects and orders from investors for a know-how or a project. “We give a unique possibility to sell innovations and, which is the most important, to order them: big businesses will bring their problems to the Exchange in order to find specialists who would be able to solve them,” The Day was told by Serhii Okhremenko, Co-Chairman of the Board of the Donbas Regional Business Club, one of the designers of the project Exchange of Business Assets.
“We are planning to divide our Exchange into several niches to make the best use of the tax conditions in Ukraine. The first niche will be a ‘paddling pool’ in which it will be possible to work using the simplified taxation system,” added Viacheslav Liashenko, head of the Department of Regulation Policy and Development of Entrepreneurship of the Institute of Industrial Economics at the National Academy of Sciences of Ukraine, the begetter of the project.
At the beginning an authorized broker helps the owner of the idea to create a standard project resume in which the essential will be to describe the advantages of the innovation for the investor. Then the project will be admitted to the expertise of the specialists, authorized by the Exchange and if their conclusion is positive the innovator will enter the Exchange. The next step is a wide range of procedures, starting with the inspection of the documents till signing the contract in case a know-how is purchased. However, even after this the Exchange of Business Assets will control execution of the contract and the arbitration court will examine violations of rights of Exchange “gamblers.”
There is already a demo version of Exchange of Business Assets website. The project is aimed at young innovators: it is planned that they will address the Exchange free of charge.
However, these are only drafts of the projects, the exchange will start working only under conditions of existence of four sides: a clearing center (dealing with financial calculations), an expert agency, an arbitration system, and brokers. Serhii Okhremenko: “The arbitration court has already been created, we are negotiating clearing services with a bank and are discussing the creation of an expert agency with universities and consulting firms. At the first stage brokers might be from scientific and technical information departments of universities piled with patents and licenses for their developments.”
The important aspect is the respect of innovators’ copyright. “There s a system of agreements that protects the interests of idea developers; this is a package of best practices of experts from the Institute of Economic and Legal Research at the Academy of Sciences of Ukraine,” Viacheslav Liashenko commented. The creators of the Exchange promise that the experts will sign a non-disclosure agreement concerning commercial secrets and will be liable for disclosing this information.
Another peculiarity of the project is that it will be based on the partnership between the state and individual persons. The tasks of the state will be to provide the institutions responsible for the performance of Exchange contracts, favor the creation of a base of innovative projects and, if necessary, act as investors or co-investors of the project. Deputy Head of the Department of Investment Innovative Development and Foreign Relations of Donetsk Region State Administration Olena Verovets assures: “We, public authorities, are extremely interested in this project. Our innovative structure is far from being ideal and we have to look for new forms of communication between the authors of the ideas and their clients. That is why our department supported the project and believes that it will be a good steppingstone for the young scientists.”
Yaroslava Tulku confessed: “Now the project is being ‘born’ and I cannot say when it starts working at full capacity, it is an experiment and we will see how it is accepted by the target audience.”
By Maria PROKOPENKO, Donetsk