CURRENT STATES AND PRIORITIES FOR THE FORMATION OF NATIONAL INNOVATION SYSTEM IN GEORGIA

Ramaz Abesadze  Vakhtang Burduli

Journal number 1 ∘ Ramaz Abesadze ∘ Vakhtang Burduli ∘
CURRENT STATES AND PRIORITIES FOR THE FORMATION OF NATIONAL INNOVATION SYSTEM IN GEORGIA

Summary

The article characterizes the current state of the national innovation system of Georgia, it shows that the majority of its members are currently in their infancy. Then, in the context of a number of key blocks of the national innovation system (block providing innovation policy of the state, block of the production of innovation, research and development sector, organizations on a transfer (transmission) of technologies and other elements of the innovation infrastructure, the system of cooperation with international innovation environment, block of financing innovative activityetc.) are identified and justified priority directions of its formation.

Keywords: innovative development; block of the national innovation system (NIS); technology transfer; financing innovative development.

Introduction

Without the existence in the country of an effective innovation system it is not possible to ensure sustainable economic growth and develop the necessary industries in the long term to achieve self-sufficiency of economy (now imports exceed exports by almost 4 times, due to the curtailment after the collapse of the Soviet Union, of the activities of many industries, Companies of which produce products for both domestic consumption and for export) [Абесадзе, 2014; Burduli, 2015]. Although several companies had been built under the government of Saakashvili equipped with imported technologies, at the same time the collapse of some of the remaining components of the innovation system happened. And now the country faces the acute problem of the formation of a complete innovation system. However, its formation requires sufficiently long time, large investments. All this determines the gradualness of its formation. Therefore, in this article we have tried to highlight and substantiate top priorities of country's NIS development in the context of each key block.

Current state of Georgia’s NIS

To date, the innovation system of the country is very underdeveloped and inefficient (although coming to power in 2012, the new government began taking some measures for its improvement, but the reorganization was very slow, for example, the "Law of Georgia on innovations "), in particular was adopted only in June 2016.

1. The deplorable situation remains in the scientific potential of the country; before coming to power of the new government a strong reduction in the number of scientists took place, a number of research institutions was closed, the salary of the remaining scientists were purely symbolic; though under the new government the salary increased by 2 times, but it was still not enough to attract to research institutions capable young professionals. The material base of science is undermined, the proportion in GDP of the funding of science, in particular, and, innovativeactivity in general is almost the lowest in the world.

2. Serious conversion requires the higher, vocational and continuing education system, which is not adequately focused on the requirements of the economy, the system of retraining is also underdeveloped inefficient and so on.

3. Until recently was, virtually absent, and so far is insignificant the transmision sistem innovationresults in production (services and mechanisms for technology transfer, techno parks, business incubators, advisory services, engineering and consulting firms).

4. Still there are no mechanisms of public financial and fiscal support for innovation in the national and regional levels yet.

5. Subsequent support projects implemented by foreign donors are not performed, that in many cases, virtually nullifies the results of their activities.

6. Grant system is undeveloped and its management is low: the state does not give orders to scientists on innovations; although there is a special fund to support research, which annually awards grants for research in the context of different scientific disciplines, but these scientific developments are not related to innovation.

7. In fact there is no connection or it is weak between science, business and government.

8. Almost there is no innovation based on own research, imports of innovation is mainly realized in the field of IT technologies, which is due to the fact that there are many factors hindering the import of new production technologies - lack of knowledge, political will and institutional support, the fear of financial risk in the case of the real investment in industries from big business, and so on.

9. Provision of legislative basis of innovation activity has been started only now. However, you can name the documents that directly or indirectly, meet the requirements of innovative development (these are the following documents: "Science, Technology and Development Act of Georgia" (1994), "Innovation concept of Georgia" (2012); Strategy for Socio-Economic Development of Georgia "Georgia 2020 "), but they were absolutely insufficient for the establishment and strengthening of the innovation system. Currently, as noted, the "Law of Georgia on innovation” has been adopted[The Law..., 2016], the provisions of which apply to the subjects of innovation, the infrastructure contributing to innovation, financing innovation and the commercialization of innovations. It should be noted that this law is designed at a very high level, it provides many of the provisions necessary to ensure such legislation, the leadership of which is necessary for the formation of a modern model of the national innovation system. In particular, the provisions of the law take into account some of the regulation, which are necessary for the regulation of the interaction between the three leading institutional sectors (government, business and science) characteristic to the national innovation system based on the principle of "the model of the triple helix", that comes now to replace the so-called "evroatlantik model"carrently in effect in the US, Canada and EU countries.

10. In Georgia, towards the creation of an innovation system a definite step was taken in 2015, the first center of high technology and innovation (Technopark) - "Georgia" was built. The goal of the Technopark is to provide start-ups, small and medium enterprises, based on knowledge, with inaccessible to them resources for their development. Units like industrial park, are at Ivane Javakhishvili Tbilisi State University and the Technical University of Georgia, which is also a step forward towards the creation of innovative networks in Georgia.

We can say that Georgia's economy is not yet developing by the innovative way. The previous government explained this by the advantage of a liberal market economy, that only the market mechanism should regulate all spheres of the economy. First, in our country there was not a liberal market economy, as the government intervened in it roughly, and, secondly, a liberal market economy does not exclude an active, effective state intervention in the economy. On the contrary, the state should create conditions for the development of the economy in the right direction. Currently, the government has recognized the need for innovative development of the country.

Priorities of formation of Georgia's NIS

In order to identify priority areas for the formation of the national innovation system of Georgia it is first necessary to draw a clear structuring of its constituent units. Based on a series of works where on the ground of researchers of NIS of EU and some other countries were systematized the blocks [Зверев, 2009; Модели..., 2013; Национальные..., 2006], and on its own development [Абесадзе, 2016], we can offer the following system blocks:

1. The block providing innovation policy of the state: a) governmental organizations, defining the innovation policy of the state, ministries, departments, agencies, foundations and other regulatory and funding agencies; b) the strategy and priorities of innovation policy; c) the legal and regulatory framework in the field of development and stimulation of innovation, including the provisions governing the relationship between science, business and government.

2. The block of the production of innovations: a) the business sector (companies producing innovative product - developing innovation units in large corporations, small and medium-sized enterprises that create innovative products); b) the enterprises developing innovative products the creation of which has been partially or fully funded by the state (for example, on the principle of state venture).

3. Research sector (universities and research institutes).

4. Organizations for transfer (transmission) technologies and other elements of the innovation infrastructure (technoparks, business incubators, centers for technology transfer and commercialization, and so on). All these structures should contribute to the identification and implementation in production of both domestic (which in a small country are few), and, in particular, imported new production technologies.

5. The system of interaction with the international innovation environment, i.e. the relationship with foreign partners in innovationactivity both in terms of supply (transfer) to the country of new technologies, as well as in terms of joint innovation activity.

6. The block of financing of innovative activity: a) government (central and regional) funding for innovation; b) the financing of innovative activities by business sector; c) public-private partnership in the field of innovation activity financing.

7. Training block.

8. Block Supporting the projects carried out by donors.

9. Block supporting the innovative development of agriculture.

Now, in the context of these blocks we will discuss the priorities of formation of the national innovation system.

1. The bloch providing innovation policy of the state. The "Law of Georgia on innovations," are designated the functions of consultative body of the government "Research and Innovation Council", the most important of which is the coordination of the development of public policy in the field of innovations and the coordination of the development of ecosystems of national and regional innovations both between government agencies and between the public, private, scientific and educational sectors. The law also outlines challenges of legal person of public law "Georgian Agency of Innovations and Technologies", which is to promotethe commercialization of innovation and stimulate the use of innovation. But nothing is said about the innovation fund, some other species of which exist in many countries with successfully developing innovation system. Of course in the law there are indicated the rules of public financing of innovation activity by agency, but it seems that in addition to this there should be Innovation Fund to finance (in whole or on the principle of public-private partnership) the most relevant in the present conditions innovative operations or development.

In the strategy of innovation policy there must be defined the priorities of country development and designed basic industries with a view to industrial innovation for, which basic public resources should be allocated, and the priority should be given to innovative development of traditional industries, the work of the majority of enterprises of which stopped in the early 90s owing to the lack of competitiveness of products manufactured on outdated technology and the lack of knowledge (the cessation of operation of these enterprises was the main cause of presnt huge imbalance between the volume of exported and imported products). In addition, the strategy must identify priorities for the formation and development of national and regional innovation systems and select priority areas for the development of national innovations in the public sector. An integral part of the strategy should be to develop special programs of innovative development, which is practiced in many countries.

Despite the fact that the "Law of Georgia on innovations"has been adopted, it is necessary to further develop the legal framework of innovative activity. For example, the third chapter of this law (Articles 16 and 17) regulates the financing by the innovative activity agency. But nothing is said about how financial resources of agencies are formed. Meanwhile, the only budgetary funding, at a very weak at the moment tax base of replenishment, will be insufficient. Therefore it is obvious that the financial agency fund should be replenished through public borrowing, which should be reflected in the legislation or other regulations. It is also appropriate to introduce into legislation a provision stating that to the universities and other research institutions must belong the intellectual property rights on those developments which are held with the financial support of the state. This situation is one of the characteristic of the national innovation systems based on a "triple helix" [Модели..., 2013].

2. The block of production of innovations. In all developed countries, most of the innovations are made in the business sector. Currentlyin Georgia the production of innovations in the business sector is at a negligible level. Large corporations in the industrial sector are few in the country, although there are many in the trade sector (which mainly grow at the expense of exorbitant import and distribution of consumer products in the country), but in the commercial sector, there is no need to produce a large number of new technologies. Therefore, before talking about the organization of innovation departments in large corporations it is necessary to rebuild hypertrophied sectoral structures of Georgia in the direction, in order that to have more enterprises in actual industries and agriculture (about the ways of such adjustment and economic mechanisms ensuring it in Georgia,see in our works [Абесадзе, 2014; Burduli, 2015; Бурдули, 2016]). Now it is more important to create small innovative private companies (which mainly have to explore new foreign technologies for their subsequent transfer to the production) and the Technology Transfer Network, to ensure accelerated growth of these import-substituting and export-oriented industries. Although in some sectors, such as the rapidly growing industry of building materials, even now it is possible tocreate innovation divisionsin large companies, which, in particular, will help to ensure the development of production in the country of many modern construction materials, which are now imported).

The priority is the creation of the state (or based on public-private partnership) small innovative enterprises, taking into account the imperatives of innovation strategy of the state (but the latter has not yet been developed).

3. Research sector. Universities and research institutions need to pay more attention to scientific research focused on innovative research.

In most developed countries (with evroatlantic NIS model, now transformed into the NIS, built on a "triple helix model") the core of the NIS, conducting research and development, are actually the universities and some other research centers [Национальные..., 2015].Today, the basis of the United States NISare approximately 150 universities, where main researches in the field of basic science and significant part of applied researches are concentrated. In addition to universities in the United States higher research institutes are engaged in fundamental research activities. Another structure of the US NIS are national laboratories (the largest institutions, developing any direction of applied science [Модели..., 2013]. The leading role is played by universities in major European countries like Germany, Great Britain and Italy. However, in France, the vast majority of basic researches carried out in the framework of the National Centre of Scientific Research (CNRS), the analog of Academy of science in the country, there are two more categories of research institutions linked to the State: public research institutions; public industrial and commercial establishments primarily engaged in knowledge-intensive sectors of the national economy [Национальные..., 2015].In a small. country of Denmark, in addition to the universities an important part of the NIS are sectoral research institutions. Besides, there are GTS-institutes ( "approved technological service provider"), extending bridge between the state and private structures. Powerful innovative infrastructure is also established in Denmark. Nevertheless, much of the innovation activity is reduced to small innovations aimed atimproving production process locally [Справка...: 5].

From this experience, it must be concluded that in a small country it is impossible to do without large-scale borrowing from abroad of new technologies. This is even more necessary in Georgia, where, as mentioned above, is required to rectify the hypertrophied industrial structure of the economy. Therefore, in the country at every stage of the promotion of innovation in production, special attention should be paid to the problem of borrowing (import) of innovation (ie new technologies), in particular, at the research and development stage in the relevant institutions (either University or Research Institute) it is necessary to establish the scientific and research division dedicated to the study of demanded foreign innovative technologies and make recommendations for their promotion to production.

4. Organizationsfor transfer (transmission) technologies and other elements of the innovation infrastructure. The "Law of Georgia on innovations," observs the following elements of the innovation infrastructure: science technology park; business incubator; business accelerator; transmission center (ie a transfer..) of technologies; laboratory of industrial innovation; innovation laboratory; innovation center; other innovative infrastructure.

In this area, in our opinion, at first, technology parks the founders of which would outline the range of its member research organizations should be formally set up in several regions,contribute to the establishment and deepening of innovative linkages between research institutions and production and also promote the establishment of the necessary elements of the innovation infrastructure as well.

The main objective of the innovation infrastructure is a transfer (transmission) technology. However, under the transfer is meant a wider range of tasks than it is specified in the said Act for the "Technology Transfer Center". In fact, in the transfer directly or indirectly, other elements of the innovation infrastructure are involved. For example, a business accelerator problem usually is to support the development of technologies (including investment), by innovative start-ups, which can also be considered as a part of the technology transfer process. Therefore, along with business incubators there must be founded first technology transfer centers and business accelerators in several regions of Georgia.

5. The system of cooperation with international innovation environment. Georgia is a small country and therefore can not produce a large number of new production technologies (and in general such production is currently negligible). Basically, it should be guided by borrowing (import) of production technologies from foreign countries (as well as in large countries there is mass importation of foreign and domestic exports of new technologies). Therefore, domestic technology transfer centers should cooperate with relevant foreign systems, in particular, domestic enterprises to assist in the acquisition of patent licenses, know-how, attract foreign engineering firms for setting of new production technologies purchased abroad and delivery of object "turnkey" and also promote the organization of joint, in particular, venture capital companies.

Another area of international cooperation in innovation is cooperation in the development and production of innovations, in particular at the stage of research and development. The problem of international cooperation in this field has not been yet solved at the appropriate level, but with the EU countries, there are broad prospects for the development of such cooperation on the basis of guidance of the provisions of Chapter 12 of Section VI of the Agreement on Association of Georgia with the EU "Agreement in the field of research, development and demonstration of technologies", where in particular, it said: "The Parties shall promote cooperation in all fields of civil research, development and demonstration (RTD) of technology focused on two-way benefit and in accordance with all levels of the adequate and effective protection of intellectual property (Article 342)." "Cooperation in the field of research, development and demonstration (RTD) of technology encompasses: (a) the sectoral dialogue and the exchange of scientific and technical information; (B) appropriate assistance to appropriate access to each side of the program; (C) increase of research capabilities and participation of Georgian research institutions in the framework of the EU programs; (D) promote joint research projects in all fields of research, development and demonstration (RTD) of technology ... (Article 343). "

6. The block of financing of innovative activity. As noted above both public and private funding of innovative activity in Georgia is very low. Meanwhile, in the EU countries with a successful innovation policy a lot of mone is spent on such funding. So in 2009 the proportion of total expenditure on R & D funding in the GDP amounted to 3.70% in Finland, Sweden - 3.75% Germany - 2.63% Austria - 2.66%, Denmark - 2.72%, France - 1.99% [Соснов, 2011: 222]. And the state's share in the total cost is less, for example, in Finland - 25.4%, Sweden - 30.0%, France - 36.2% (though later in France the proportion of public expenditure increased to 49.9% [Национальные..., 2015]). Therefore, in order to form and use the NIS in Georgia, you need to dramatically increase both public and private expenditures in this area.

Public funding of innovation activities depends on the capabilities of the state budget expenditures. Due to the low tax base of its replenishment, it is now, as noted, negligible. Therefore, to provide a reasonable size of public funding, it is necessary to improve the tax system by increasing rates of certain taxes. And private capital is not yet sufficiently organized to allocate sufficient funds for the development of NIS and innovation activity. In private business, most of the available funds are concentrated in the area of commercial capital, which, in view of the large risk because of incompetence, does not seek to place them in the innovative sphere of the industrial sector. Therefore it is necessary to self- restructure the system of business. In order to confirm the correctness of our following proposals in this field, we first give the following quote: "The rapid success of the innovative development of South Korea has become possible thanks to the active borrowing of foreign technology and competent patent policy. An important role in the "economic miracle" of Korea played large financial-industrial groups (chaebol), which were the basis for national economic development for many years"[Справка...: 14]."In South Korea, initially modernization was built on borrowing foreign technologies, which took place in various forms: contracts" turnkey ", licensing, consulting services. The study of foreign experience took place mainly through the establishment ofjoint venture companies with Japanese partners. At the present time, despite the fact that Korea is leading in many high-tech positions in world exports, the country is still largely dependent on imported equipment due to insufficient development of their own core technologies "[Справка...: 7, 8].

To increase the investment activity of business, Georgia just needs according to the prior example UK, the creation FPG, with the inclusion in their composition of trading companies (after the example of the United States. [Цветков, 2000]), and as part of PPG the bank must have sufficient competence to select suitable areas for funding the creation of innovative companies in the industrial sector not only through credit, but also through venture investment produced directly by the bank, as well as by other companies, members of the PPG, possibly on public-private partnership with the participation of the Georgian agency of innovation and technology. Venture innovative firms should be established jointly with foreign partners to.

More ways to improve public investment and business arrangements to the real sector of the economy are presented in [Бурдули, 2016].

7. Training block.Training of innovative personnel (including innovative managers) can not be carried out haphazardly. It should consist of interconnected stages of increasing knowledge and competence. Along with universities, training experts in the field of fundamental and applied sciences, and institutions directly focused on the acquisition of knowledge in the field of innovation activity (such as innovation center according to the Law of Georgia on innovation), National Engineering schools play a huge role in developed countries [Модели..., 2013; Сергеев, 2008: 8]. Of great importance for the development of innovative activity is the training of highly qualified specialists - namely doctorsof sciences. In some European countries, such as the Netherlands and Austria, there is an increasing shortage of doctors of scientific and technical professions, or even a lack of competent personnel, which leads to low returns from research and technological development [Справка...: 6, 9, 10],and the insufficient development of cooperation between science and business in some countries, such as Germany, encourages them to build in the universities the departments of business, designed to promote broader commercialization of research [Справка...: 12].

In our opinion, the doctor of sciences in Georgia must be prepared not only at the university departments (as is the case now), but also in specialized research institutes, were scientific researches of both fundamental and applied nature are mainly held.

8. Block supporting the projects carried out by donors. Important projects in Georgia were carried out by donors, but their commercialization did not take place; important financial and intellectual meanswere spent in vain, therefore in the future such projects should be carried out, the implementation of the results of which are sure to happen in the industry. To do this, at the Georgian Agency of Innovation and Technology should be created temporary units to support the implementation of the projects done by donors, which will be to monitor, finance additionally if necessary, , commercializethe projects and other actions required.

9. Block supporting innovation development of agriculture. Currently, agriculture is very inefficient in Georgia: its productivity is low; the organizational and institutional forms of agricultural production are not regulated, in particular, there is a large number of small non-market households with very low productivity; few specialists, in particular, agronomists, designed to provide advisory assistance to agricultural producers, and there is no regulatedsystem of their consulting service. Therefore, in our opinion, the formation of isolated systems is necessary to promote innovative development of the agricultural sector. It seems appropriate to urgently establish the Agency of innovation development of agriculture under the auspices of the Ministry of Agriculture of Georgia, where consulting and other necessary services will be created as its part based on public-private partnership.

Conclusion

Thus, the country is facing a daunting task of forming a national innovation system. At its formation we should adhere to the principle of gradualism, focusing on the top priorities in the context of each key block of innovation system. In the innovative development strategy the main branches should be scheduled with the prospect of industrial innovation, and particular attention must be paid to the innovative development of traditional industries, the production of which is strongly curled up in the post-communist economic collapse. In terms of innovation production unit it is necessary to encourage large corporations to create innovative industrial units, it is also actually to create small private and innovative enterprises based on public-private partnerships, which in particular, and to a greater extent must master borrowed technology. The country needs to establish an effective network for technology transfer, which in addition to "centers of technology transfer" will involve other elements of the innovation infrastructure. Domestic technology transfer centers should cooperate with corresponding foreign systems in order to promote domestic enterprises to learn new production technologies purchased abroad. It is necessary to increase both public and private financing of innovation, which is currently at a very low level compared with the financing in developed and emerging countries. In the private sector this problem willbe solved by the creation of financial-industrial groups.

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