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600 billion HUF has been pumped into economy already, and that is just the beginning
600 billion HUF has been pumped into economy already, and that is just the beginning
09 March 2018
Last modified: 09 March 2018
Reading time: 14 minute(s)
Interview with József Pálinkás on Portfolio.hu
In the next two years it is inevitable to double the annual budget of the National Research, Development and Innovation Fund by 2020 from the current HUF 83 billion, that is, “the state should contribute the same amount as businesses to the Fund which facilitates research, development and innovation” – József Pálinkás urged in an interview with Portfolio.hu.

The President of the National Research, Development and Innovation Office claims that this is the only way to utilise the developing research infrastructure across the country, to continue on-going programmes and to avoid “a downturn in research spending in 2020-22” in Hungary. József Pálinkás also explained the significant changes in the rules of calls announced from the Fund from 2018, and due to the more stringent requirements he asks businesses “to apply only if they are in excellent financial standing and can operate reliably even without the funding.”

Portfolio: In our last conversation more than a year ago you urged the responsible and efficient utilisation of funds and emphasised the importance of rigorous professional assessment to ensure that only those RDI projects are funded that really improve Hungary’s competitiveness. In the year 2017, which was still ahead of us, you warned applicants against overpricing resulting from the hidden increase of wages or unreasonable subcontracting.  What is your experience, did the applicants follow your advice?

József Pálinkás: Well, in part, they did.  But first let me sum up the big picture: since 2015 altogether 2000 innovation projects have been launched by Hungarian businesses and just as many by universities and research institutions with over HUF 600 billion of funding in total under the research, development and innovation calls designed, and partly announced and assessed, by the Office.

The calls have substantially improved in the sense that the funding principles and objectives presented in many forums as well as the justified rejection of project proposals have resulted that the RDI element is now more pronounced in project proposals and that applicants submit more realistic budgets.

At the same time, we must see that there may be a tension between the requirements urging the disbursement of funds and the use of RDI funding and the expectations toward the quality of RDI projects. If we set too strict conditions for RDI calls, businesses will not be able to meet them.

The Office therefore developed the assessment criteria of the calls in a way that ensures compliance between quality requirements and the RDI performance that can be expected from potential applicants in all funding schemes. So different criteria apply to businesses and university research projects. In the case of businesses, innovation may also include the introduction of a solution which is primarily new to the activity of the applicant and thus enhances its competitiveness. Discovery research calls announced for universities and research institutions demand research findings that can be considered new even in international comparison.

I also often read through project proposals and my impression is that applicants and tender writers often use certain buzzwords in hope of getting a guarantee for a positive assessment.  In reality, however, it does not matter how many times these words are written down if the proposal fails to clearly define the development objectives and the anticipated economic gain or result.

Could you specify the share of rejected project proposals to illustrate the practical implications of the greater strictness of the Office?

As I explained it at a professional forum in early February: overpricing was by far (in 80-90% of the cases) the most common reason for rejection in all three assessment rounds of the Corporate RDI call. In addition, in 50-70% of the cases assessors found too high implementation risks. The latter means that, according to the assessors, the project ran an excessive risk of failure on the basis of the business’ past financial management; for instance, it has no sufficient own funds in proportion to the requested amount of funding or it is highly dubious that the business can keep up normal business operations. In nearly half of the negative decisions the assessors reported that the applicant or its supplier lacks the required professional competence or material assets. This is why I said at the February forum that businesses are encouraged to apply only if they are in excellent financial standing and can operate reliably even without the funding. 

Going beyond these messages, do you also modify the rules of participation?

Yes, based on the awards decisions and the feedback from the assessors, we have made several changes to the calls announced this year from the National Research, Development and Innovation Fund. It is a new requirement, for example, that the share of own funds offered by the business in a given project proposal may not exceed 50% of the total own equity of the business. Businesses will also have to professionally substantiate the necessity of using the services and procuring the assets indicated in their proposals, which will make project budgets more realistic.  If a proposal fails to clarify why a given service is procured from a given external provider, it will be rejected.

It was also an important lesson last year that many project proposals were submitted without price quotes, playing on the opportunity to submit them later, upon a notice of deficiency, and this widespread practice substantially slowed down the decision-making process. In the 3rd turn of the Corporate RDI call 90% of the project proposals were sent notices of deficiency. For this reason, the new call sets it as requirement that all price quotes necessary for assessing the soundness of the budget have to be submitted together with the project proposal and may not be submitted later, upon a notice of deficiency. In order to reduce the risks of project failure and the lack of sufficient professional competence we have introduced another new requirement: in the case of applied industrial research projects applicants have to employ at least two full-time employees with at least MSc degree.

When we last talked more than a year ago you mentioned the Polish model in relation to the pre-selection of applicants. Have you achieved it? And how does it differ from the above-mentioned administrative kind of pre-selection?

We have used this method already in 2017 for the assessment of the Frontline call: experts select strong candidates (around 50% of the applicants) and invite them in a second round to present their project proposals in person. In the case of the Frontline call 20 out of the total 44 proposals were selected for personal interview. It was a very interesting experience to listen to them and ask them questions. The preliminary ranking, which was based on the assessment results, was significantly modified after the interviews. The interview panel’s impression was that the applicants wrote nice things in their proposals but more specific questions about the implementation revealed who is more convincing in their ability to put plans into practice.

The Frontline call provides funding of up to EUR 1 million to groups engaging in research for five years. This is a substantial amount in Hungarian terms, but is it competitive in the international arena as well? And is it typical in other countries that the state tries to lure back their own prominent researchers?

The Frontline call, as the name suggests, supports Hungarian researchers who are globally renowned and belong to the international forefront in terms of scientific performance in their respective field of science. By winning the funding, it can be ensured that they stay in the forefront while performing research in Hungary. There is fierce competition for the best researchers all around the world, so the selection system and the funding model designed to promote research excellence play an extremely important role in research funding. 

I am pleased that the model of competitive project funding received international attention, as it was honourably mentioned among others by Nature, one of the world’s most prestigious scientific magazine. I think all countries will launch a call like this as it has been admitted almost everywhere that keeping the most brilliant minds at home is a serious interest. It is not only about highly talented, outstanding individuals doing research in a given country in a given topic; it is also that excellent principal investigators gather first-rate researchers around themselves and create schools. Many Frontline project proposals apparently built on research centres which I have seen only in Cambridge or Oxford.

What is the difference between the Frontline call and the so-called visibility call?

In this call we support researchers whose citation index belong to the top 5% in the world in a given field of science. However, as a significant difference from the Frontline call, this funding is awarded on the basis of already published scientific achievements and publications. The funding model encourages Hungarian researchers to publish widely cited publications, that is, to contribute to the international visibility of their scientific achievements.  To put it very polemically, even a single publication is enough if it makes a strong candidate for the Nobel Prize. The expectations are high but realistic, this is clearly shown by the fact that 52 applicants were awarded in 2017.  We can be proud of these 52 researchers who are among the best researchers in their respective fields of science.

Our aim is to assure researchers who continuously produce outstanding research results even by international standards that the funding provided to them in the framework of the call is sufficient and their future funding opportunities are predictable. Stability is extremely important factor when attracting researcher working abroad back to Hungary. The researcher career consists of several stages. When you are a PhD student, you travel the world and start a researcher career. However, when you establish a family and your children start school, predictable income and competitive working environment will become key points of consideration. Americans have realised this a long time ago: lecturers get a final position in the university by the age of 35-40 which guarantees a secure middle-class living there. But this is not only about salary but also about a stable research environment.

The funding system, therefore, should not change every year because it would result in an unpredictable environment and researchers, developers and businesses could not plan their projects. This is why the NRDI Office has developed a system of competitive RDI calls, the predictable, scheduled announcement of calls for various target groups and the transparent assessment process.

Still, there are some changes in certain funding schemes.

Yes, because the funding schemes in the system of competitive calls are fine-tuned, modified or new funding schemes are developed based on the analysis of the awards data and experience of previous years. In 2018 we have introduced two major changes to the calls for businesses financed from the NRDI Fund.   One of them is that we saw in last year’s call promoting export growth that Hungarian businesses have difficulties with undertaking exclusively export-oriented R&D project objectives. So, we incorporated export as an assessment criterion in the Corporate RDI call. If an applicant can contribute to the export growth by performing a development, it is a benefit for it, but this is not an exclusive requirement for receiving funds.

The other change is that the needs and possibilities of small and medium enterprises largely differ from that of micro enterprises, so we divided the corporate call into two parts: one is dedicated to micro and small enterprises, and the other one to small and medium enterprises and large companies. The first one offers smaller amounts of funding and involves different assessment criteria, as micro enterprises should first become capable of implementing an innovation and reach a higher technological level. A medium-sized company, however, may well be expected to fully focus on the creation of an innovation.

The Office has already announced this year’s calls from the NRDI Fund earlier this year which suggests the volume of its budget but what is expected for the next years?

The portfolio of calls published early this year clearly shows that the Fund has approximately the same volume of budget (HUF 82 billion) than last year. The currently available EU funds will have been used by 2020, and the operating costs of the recently upgraded research infrastructure will continuously increase.  In 2019 and 2020, therefore, we will need significant changes: it is inevitable to double the annual budget of the Fund by 2020, that is, the state should contribute the same amount as businesses to the Fund which facilitates research, development and innovation. If the increased contribution to the Fund was secured next year, it would enable the utilisation of the funds in 2020–23. This is exactly when we will need substantially more funds to substantially operate the modern research infrastructure and to continue the projects in progress.  This would enable us to avoid a downturn in research spending in 2020–2022 similar to the one in 2016 after the end of the previous EU framework programmes which would make it really hard for us to meet the goal of 1.8% spending-to-GDP ratio by 2020. We have set this goal and we should keep to it, or rather exceed it.

You mentioned infrastructure. The laser research centre in Szeged is a unique element in Hungary’s research infrastructure. Will there be enough researcher to use its full capacity?

The laser facility in Szeged is already up and running and is receiving more and more attention; for example an American technical journal analysed in a recent article that the newly established infrastructure is world-class and can give a competitive advantage to Europe in ultra-fast laser technology compared to the USA. By the way, our national excellence programme will also support research specifically dedicated to increasing the scope of utilisation of the Szeged-based laser facility’ capacities.  Hungary can only use a small portion of it, so it is in our interest both financially and in terms of our researchers to attract as many scientists as possible to use our equipment. As a matter of fact, in February a group of Swiss and Greek researchers started the first experiments in Szeged.

The total amount of RDI funds available in the 2014–2020 period is around HUF 1200 billion, financed from EU and domestic sources. Half of the cycle is already behind us, and according to the above-mentioned summary report nearly HUF 600 billion has been awarded to businesses and research centres so far. This means good performance on a pro rata basis, but is it no longer a danger that HUF 1200 billion is too much and cannot be spent on workable projects?

I think the full amount will be used even if the Hungarian central budget will indeed drastically increase its contributions to the Innovation Fund. Still, there is a challenge we face here, namely the disbursement of credit facilities. They draw much less attention than non-refundable funds which are subject to heavy over-application.

The establishment of the public network of assessors was not seamless. What is your experience, has any GINOP project proposal been returned because the market outdated it and the innovation element in the project was no longer a novelty?

The NRDI Office publishes the major stages of assessment and the related deadlines for all calls in its website. We keep to them, so this should not be a matter of concern in the case of calls financed from the NRDI Fund.

In certain EU calls, where the responsible managing authorities had to organise the assessment of thousands of project proposals in the framework of the public assessment system, there were indeed some delays, but the award decisions have been published by now.

Source: portfolio.hu

Updated: 09 March 2018
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