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Hungary’s competitiveness at stake: here is the government’s innovation master plan
08 September 2023
Modified: 08 September 2023
Reading time: 9 minute(s)
An innovation-focused economic policy based on cooperation between universities and companies is needed to improve Hungary’s competitiveness, Ádám Kiss, President of the National Research, Development and Innovation Office, believes

We also asked the new President of the NRDI Office, appointed in early March, about the steps needed to achieve the ambitious innovation targets, the soon-to-launch, thoroughly revamped HUF 35 billion market funding scheme and the cooperation between the actors in the innovation ecosystem.

Since the beginning of March, you have been leading the National Research, Development and Innovation Office, what are your main tasks and goals in your new position?

The innovation ecosystem has evolved a lot in recent years, with a model change of universities and the research network, the launch of university-business partnerships, improved research infrastructures, and a number of programmes supporting market and research excellence in innovation. These provide a sound basis, but we still have a lot to do: we need to make public investments into innovation more focused and strengthen expectations aimed at exerting an economic and social impact.

As a next step we need to create further efficiency-enhancing associations between the actors in the innovation ecosystem, and to set in motion processes that stimulate this. I think I can help with that through my experience in the financial and market world. We are a country with outstanding research potential but limited natural and financial resources. We must be very careful in allocating the resources available to us in order to achieve results that will strengthen the future of our nation and our economy.

Where would a change of approach be needed, how can this be done?

The innovation success of a country is not measured by how many unicorns, Nobel Prize winners or world-class inventions we have, but by whether we can produce a few dozen companies with a market capitalisation of over a hundred million dollars, producing for export markets, and having at least part Hungarian ownership and a research centre in Hungary, where they maintain jobs.

We should also use Hungary’s strong FDI attractiveness to ask incoming firms to contribute to innovation, including, by providing access to a 2–5-year technology and development roadmap. This would provide the type of supplier development that would allow the domestic SME sector to prepare in advance and make investments in the hope of becoming a secure, reliable technology supplier to multinational companies with long-term commitments.

How is the government’s innovation institutional system now structured, what are the roles of the various bodies in it?

The government’s innovation institutional system is characterised by the fortunate coexistence of higher education, innovation policy and science policy, all under the supervision of Minister János Csák, in the Ministry of Culture and Innovation. As we expect results primarily from university- and research-institute-centred innovation and the cooperation of such institutes with the market, in line with the objectives of the John von Neumann Programme, it is very important that these areas are jointly managed.

Conscious, coordinated background work is also taking place between the Ministry, the NRDI Office, the Hungarian Research Network, the Hungarian Intellectual Property Office, the Bay Zoltán Research Institute and the newly established National Innovation Agency. But of course, Balázs Hankó, the State Secretary for Innovation, and his team are also putting a lot of effort into working with the technical teams of other ministries where there are innovation-related issues. We have also consulted with these government actors on several occasions in the development of the John von Neumann Programme and the recently launched focus area innovation call, and delegates from the ministries are also represented on our Innovation Advisory Boards.

One of the objectives of the new Hungarian innovation strategy, the John von Neumann Programme, is to rank Hungary in the top 25 of the Global Innovation Index by 2030 and in the top 10 by 2040. We are currently the 34th, with the Czechs and Slovenians ahead of and Bulgaria right behind us. Is it a realistic goal to overtake, for example, the French and the Japanese in the ranking by 2040?

These are not just ideas plucked from thin air, but achieving them requires systemic thinking, continuous measurement and feedback. We have analysed the indicators of both the European Innovation Scoreboard and the Global Innovation Index and identified areas where government can have a significant impact. One of our most important tasks is to build these indicators systematically and consistently into all our actions, into all the programmes we launch. These mainly concern publications, researcher recruitment, employment parameters, company-university cooperation and industrial property rights.

A new market call for proposals has recently been launched, who can participate and under what conditions?

A total of HUF 35 billion in non-reimbursable grant will be provided to innovative businesses and universities and research centres under the call for proposals, which was put out to public consultation last week and is expected to be published in early September. Applicants are expected to develop such innovative products and services, or to improve existing ones, that can compete internationally.

In which areas are applications invited?

In designing the John von Neumann Programme, we have identified three areas where we not only have internationally competitive research and industrial capabilities and competences, but also where we see growth potential based on European and global technological trends.

Accordingly, applications are mainly invited from the fields of healthy living, green transition and promoting the digital transformation of the economy. The amount of funding per project ranges from minimum HUF 400 million to maximum HUF 800 million.

Each theme is eligible for non-reimbursable grants of HUF 10-10 billion. We will also keep a general budget of HUF 5 billion to support high-quality proposals that do not fall into these areas but have significant growth potential or could play an important role in the national economy and government. Without being exhaustive, but for orientation, we also welcome applications from the dual-use defence industry and the field of materials science.

What demand do you expect?

On the basis of our preliminary needs assessment and discussions with businesses and universities, we expect a significant oversubscription.

In this light of this, and also out of professional conviction, we have raised the entry threshold considerably. Only SMEs with a turnover of more than HUF 300 million in their last financial year and at least 15 employees are allowed to be consortium leaders. We are also introducing a dividend limit, the aim of which is to recognise that an applicant is thinking long-term, i.e. reinvests most of its profit generated in the development of the business.

What is the payment schedule?

Payment of the grant awarded to the successful applicants will be conditional on the achievement of professional milestones. Under this scheme, instead of the previously paid 75%, the applicants will be paid a 30% advance at the beginning of the project implementation period. Another 30% will be paid at the end of the first milestone year and 25% at the end of the implementation period (normally at the end of the second year). And eventually, at the end of the maintenance period, if the applicant has met its commitments on turnover and patent registration, we will pay the remaining 15%.

What are the changes in the evaluation and the monitoring system?

Perhaps the most important innovation in the whole call for proposals is the radical overhaul of the proposal evaluation system. We have reduced the pool of nearly 2,000 evaluators to 350, following the example of Israel and the EU. Experts were delegated by the Hungarian Academy of Sciences, the Hungarian Research Network, the Bay Zoltán Research Institute and numerous universities. At the same time, we have paid particular attention to ensuring that experts with real market knowledge are heavily involved in the process.

While the evaluators have so far assisted this Office in the evaluation of proposals, their work will now be complemented by technical monitoring of the winning projects. Once the funding decision is made, their name will become public and they will monitor the project professionally throughout the implementation and maintenance period, reporting to us every six months on the progress of the development project.

We want it to be clear in the minds of all applicants that the full amount of public funding awarded is not automatically given to the winning applicant, and that it is not free money, but an investment of taxpayers’ money.

If the technical implementation of a project does not go according to plan, it will be possible to stop it, though, without any obligation to repay. There’s nothing sinister about this, in business, but in, more broadly speaking, all walks of life, an idea may, despite the best intentions, fail to live up to the expectations. And the solution is not that we keep extending the life of the project.

How is the promotion of cooperation between universities and businesses progressing?

Within the framework of the University Innovation Ecosystem Project, university technology transfer offices have been set up, whose main task is to match university competences with market needs. We see encouraging results in the number of service and RDI utilisation contracts with external partners, and in the commercialisation of research results, but we also see that the vast majority of these are linked just to a few large universities. We are working to ensure that all universities have a market-oriented research strategy and that technology transfer offices employ sales, technology and legal staff with market experience, who receive a performance-related pay. One of our key objectives, as set out in the John von Neumann Plan, is to link university and market. We believe that if we achieve success here, it will have an impact on the entire innovation ecosystem and can be the key to the future success of the entire Hungarian economy.


Updated: 08 September 2023
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