Sep 19, 2012
By Charo Navarro Mateo
RIGA - Located in a dynamic part of Europe, Latvia is
positioned as a gateway between the East and the major
markets in the European Union, with its population of over
500 million. The Baltic country has also developed strong
pharmaceutical and medical device industries. However, in
analyzing the country in terms of innovation, the study
"Union Innovation Scoreboard 2010," published in 2011,
Latvia ranks last among the 27 surveyed countries.
Innovation development in the Baltics was a central theme
at the Life Sciences Baltics 2012 Forum, held last week in
Vilnius.
"We know that R&D is the key where [we have] to be able to
perform and achieve advancements (…), we had problems in
Latvia during 2009 and 2010, but since then we have
recovered and grown again, and it shows in the amount of
exports in the sector," said Juris Puce, 1st Secretary at
the Ministry of Economy. Latvia has seen 29.4 percent
growth in exports from companies focused on pharmaceuticals
and medical devices.
These figures are supported by the activity of the two main
Latvian companies in the sector - Grindex and Biosan -
which have much of their sales activity abroad. In the case
of Biosan, already represented in the U.S. and now
expanding to Japan and South Korea, this figure reaches 98
percent. "The way to develop a company is in its
international orientation and collaboration, which is
[essential] in modernizing its infrastructure and
technologies," says Juris Bundulis, Chairman of the Board
of Grindeks.
Nevertheless, Latvia reports spending 0.6 percent of GDP on
R&D. Scientific research spending in the private business
sector in 2010 was 0.22 percent of GDP, a figure
significantly behind that of the old EU member states, as
well as below the average EU rate overall in this sector -
1.23 percent of GDP, states Eurostat figures.
From the Latvian industrial sector, Vitalijs Skrivelis,
chairman of the supervisory board of the Latvian
Association of the Chemical and Pharmaceutical Industry
(LAKIFA), is optimistic about what Latvia can offer, mainly
in anti-cancer and cardiovascular treatments. "We keep
competitive even without a large public budget, but what we
need is working capital (…), our banks are so conservative
[when it comes] to investing in risk capital."
What Skrivelis wants to point out is apparent in the report
"Development of Science and Technology in Latvia 2011,"
published by the Ministry of Science and Education. Latvia
is in 5th position from the bottom in terms of investment
per GDP; for comparison, the European average is 2 percent
of GDP. Both the public and private sectors have shown a
weak capacity for investment in R&D: of the 0.6 percent of
GDP in total R&D spending, most of this came from the
private sector.
The increase in research financing has, however, been
significantly affected by the EU Structural Funds: the
program "Entrepreneurship and Innovation," designed by the
EU Commission for Latvia, accounts for approximately 16
percent of the total money allocated to the country for the
period 2007-2013 (736 million euros, in contrast with the
103 million euros from the Latvian government).
Education and investment
Which are the main factors that explain this situation? For
Richard Bergstrom, Director General of the European
Federation of Pharmaceutical Industries and Associations
(EFPIA), the main issues are to achieve an Equal System,
with R&D as the main economic and social value driver, with
research activities done by academics. "The low level of
public and private sector investment and an insufficient
number of employees in research work" could be the main
reasons for the low level of development of R&D in
Latvia.
"Research activity is increasing, but we are concerned that
we are still in last place in terms of investments in
Investigation, Development and Innovation (I+D+I)" says Dr.
Osvald Pugovics, scientific director at the Latvian
Institute of Organic Synthesis.
In the same way, Bundulis says that with the level of
national research: "we are happy with the people we have in
Latvia today, (…). They can be ambitious people. You can
always find better, but with the resources we have, we are
at an optimal level. The people recognize that they really
believe that they can do it."
It can be concluded that Latvia needs to pay special
attention to the funding mechanisms, to ensure more private
investment to strengthen the development of research
institutions, both private and public, and their mutual
collaboration. This need is on the agenda of the EU.
European Horizon 2020, the roadmap designed by the European
Commission, is the core of the public European investment
program in R&D, to respond to the global economic crisis
and strengthen the EU's global scientific position. It is
developed through multiple programs and initiatives that
are financed with 80 billion euros to ensure the necessary
technology, research talent and infrastructure for the
future. The plan sets a rate of development in R&D for each
country; for Latvia R&D growth is targeted at 1.5 percent
for 2020.
"We really think it is possible to reach the rate of 1.5
percent as part of European Horizon 2020, as we are doing
everything that is required. Many new companies and
entrepreneurs are emerging and development is going fast.
It is a question of time," says Jelena Narkune, head of the
representative office of the Investment and Development
Agency of Latvia (LIAA) in Lithuania.
The Agency (recently named one of the top 10 performing
national investment promotion intermediaries in the world)
centers its activity, as a public institution, in offering
a wide range in services to help companies to expand their
business, including through foreign trade promotion,
investment attraction, as well as state support
programs.
"A national commitment to increase research and development
funding, compared to total investment, represents an
ambitious but realistic long-term goal. It is already shown
in the growth of contacts with [other] countries in getting
the same experiences," remarks Narkune.
Development and the healthcare system
The conference was not just centered on the commitment to
economic growth. "For everything, there is a social part
that we have to take into account," said Bergstrom. He
points out the necessary relationship between universities
and industry, and competition in clinical trials as a model
of R&D that should have a social effect on a country.
How is investment in technology and R&D developing the
healthcare system in Latvia, and how does this relate to
the population? Is it centered on the competition in
clinical trials as developed by universities and hospitals?
Most of the Latvian manufacturers are focused on exports
and operate on the global markets as their first priority.
According to Latvia's 1st secretary of the Ministry of
Economy, the country also needs an "interconnected system
for citizens to get the best drugs or devices [available]
in the international sector."
In the same way, Skrivelis defends the export profile of
industries, because "small countries need to go
internationally, to get innovative technology from strong
countries, for example, technology to find a cure for
cancerous melanomas.
Future challenges
The general feeling among the speakers is that Latvia is on
its way, but its challenges are great. "First of all, we
cannot forget that the key to success is not just companies
and their internationalization. It is more than that,
because industry cannot be developed without the work of
scientists, who actively move around the educational
institutions," says Bergstrom.
In that sense, what experts point out is the necessity for
Latvia to invest in education. The country needs to
increase the number of people employed in science and
research, where this is the beginning of a developing
science and research environment. For Grete Kuura, project
assistant at TERM and HealthPort at the University of
Gothenburg, "The [Baltic countries] face the crucial
challenge to invest in collaboration between science and
industry to reach their potential for commercialization,
not just in manufactured products, but in research
results."
The shared result between analysts and businesspeople is
that the best economic and social growth is through
education. "The key to success is in people and believing
in them" says Bundulis.
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