The Path to the Information Society
in the Central and Eastern European Countries (CEEC):

The Role of Research & Development and Experimentation
Report of the Working Group for the CEEC/EU Panel

on 7/8 March 1996 in Bled, Slovenia

Introduction

  1. One of the key aspects of the evolution of the most advanced industrial countries in recent years has been the trend towards the "Global Information Society" (GIS), a trend driven by technology development and the globalisation of trade, but with profound social, cultural and economic implications. Now, too, the Central and Eastern European Countries (CEEC) are embarking on the same path.
    It is vital to ensure that the new information society develops throughout Europe, both in east and west, and through co-operation between them. It is in the common interest of all European countries to establish high-performance pan-European communication networks and to create the conditions for a cross-border transfer of data and information.
  2. We are all currently experiencing the onset of a revolution. This new revolution is based on a radical transformation in how we use knowledge. The currency of knowledge is information. Skilled and motivated people create the information which is stored, manipulated and transmitted over electronic networks of networks. These networks are global. In our new society, information is the key resource, just as steam power was a key resource in the first industrial revolution. Hence we can talk about an information revolution - a revolution which is already producing a new society - an information society.
    This revolution is changing the way we work and the way we spend our free time. Our working environment is becoming globalised and mobilised. The telephone, fax machine, personal computer and Internet connection allow us to talk to people in a neighbouring continent as easily as to those in a neighbouring office. The mobile phone and lap-top computer are helping to free us from the limitations of the fixed workplace. All this is helping bring Europe and Europeans closer together.
    The information society is inevitable. As the Bangemann report states:
    "The first countries to enter the information society will reap the greatest rewards. They will set the agenda for all who must follow. By contrast, countries which temporise or favour half-hearted solutions, could, in less than a decade, face disastrous declines in investment and a squeeze on jobs."
    1. The EU has already started to lay the regulatory foundations for the information society. In a landmark decision, it has decided to open its public telephony sector to the free market by the end of 1997. The aim is the creation of competitive and high-performance "information superhighways" which will provide much of the technology backbone of the information society. At the same time, the EU Research and Development (R&D) programmes are contributing to the development of advanced communication infrastructures and telematic applications as well as building the basic technologies of the information society. The Fourth Framework Programme (1994-1998) has allocated a total of more than 3,6 billion ECU towards this goal. The next important step will be to support experimental pilot projects in order to strengthen the practical acceptance of the GIS and to gain more experience in the adaptation of new technologies.
    2. The common objective is to establish a global, open information society. There are, however, different ways to reach this objective, and different timescales; it is neither necessary nor possible to exploit the full potential of the information society right from the word go. The CEEC have already started on the way towards the information society. What is needed is to speed up this process, to increase investment and to coordinate efforts within and between neighbouring European countries.
      The path towards the information society is not proving easy for the CEEC as the structural adjustments resulting from the changes in their political and economic systems have not yet fully run their course and still require high political priority. The CEEC are confronted with a difficult two-fold task; on the one hand to support re-industrialisation and on the other to provide the basic structures for "post-industrialisation". This is not only an economic necessity but also a part of their pre-adhesion strategies. Realistically, we have to take into account the fact that not all the CEEC will participate in every application and thus be able to reap all the ensuing benefits at the same time. Therefore, national priorities will have to reflect the different ways towards the GIS.
    3. Just as the information society brings with it new patterns of supply in terms of new methods of working so it also brings new patterns of demand in terms of new products and services. Existing services can be revitalised and expanded, new services can be created. Possible examples are education and training, home shopping, electronic payment and banking systems and on-line information services. It is primarily in these new service industries that new employment opportunities will be created and new prosperity generated, not only in the EU but also in the CEEC.
      The primary driving forces behind the information society are technological and economic. And its most immediate benefits will be the increased competitiveness it can provide. In a world where many Third World countries are rapidly expanding in traditionally labour intensive areas such as textiles, the countries of Europe will be ever more reliant on productivity gains to improve living standards. The prevailing competitive advantage of low labour costs of manufacturers in the CEEC will soon be challenged by even lower-cost economies from outside Europe; quite apart from this, it is likely that labour costs will increase in line with further economic development. In order to enhance their competitive position in global markets, the CEEC will have to improve productivity and the quality of their products and services. This enhanced competitiveness will be triggered by the application of new Information and Communication Technologies (ICT).
    4. A dynamic and cost-effective communications infrastructure is vital. Therefore the CEEC will need to create an appropriate legal framework, including the rapid liberalisation of the telecommunications sector, as part of their drive towards the information society. This will ensure that competition drives down costs and thus encourages private investors to develop new services. A clear deadline for opening the public telephony sector to the free market will stimulate the necessary private investment in the required timescales. In addition to this, a crucial requirement for the success of the transition process is a strong innovation drive which will lead to investments in new technologies and applications.
      Due to the current transition problems, it is not easy for the CEEC to initiate and strengthen the innovation process solely using their own resources. The EU should be willing to support national strategies with the aim of integrating the region successfully into the GIS. The aim is to build true pan-European networks so that all European countries can reap the benefits according to their own priorities. For this, it is necessary:
      • to maintain and strengthen R&D in the CEEC
      • to foster R&D cooperation between the CEEC and the EU
      • to promote joint experimental GIS projects and programmes that create European networks and services to adopt an appropriate legal framework for the liberalisation of the telecommunications sector.

A. Towards a knowledge-based Society: the Role of R&D in the Economic Development of the Central and Eastern European Countries

  1. The information society will be a knowledge-based society. The technologies which are driving this development are specialised in the production, storage, manipulation, access and transmission of information, and information is the raw material of knowledge. The provision of knowledge will therefore become a key factor in enhancing the competitiveness of enterprises in the information society. The productive use of knowledge is increasingly determining the competitiveness of products and services, and the location of their provision. Knowledge will therefore become the most important factor of production in the advanced economies of the world.
    Education and knowledge is an area where the CEEC have an important comparative advantage. To maintain this advantage, it will be necessary to foster intellectual resources. In the information age, social and economic progress is closely linked with technological progress, which itself ultimately stems from research and development. Thus our attitude towards R&D is fundamental. R&D allows our hopes for the future to be realised - it is an engine of change in our society.
  2. Failing to adapt in time to the onset of the information society is a real danger for the CEEC which does not, however, leave them without a chance of establishing a lead in many technology areas. A more measured development path can also offer some advantages. Because the CEEC are starting in many cases from square one, they can take full advantage of "technology leapfrog" to install modern systems straight away, rather than modifying existing equipment. This helps to avoid costly upgrade paths and allows the introduction, right from the start, of the best technologies. By encouraging private investors, liberalisation of telecommunications infrastructures and services will speed up this process and contribute to giving R&D the importance it deserves in the development of innovative technologies and applications for the information society.
    Some of the CEEC are already better prepared than others for the GIS as differences in the regulatory framework as well as the distribution of telephones, television sets and PCs show. The rapidly growing number of connections to the Internet in some of the CEEC also demonstrate that less developed areas can catch up relatively quickly with more advanced ones in a world that is changing at an ever faster rate. The cards in the GIS deck will continue to be reshuffled so that society's willingness to change will determine the winners and losers of tomorrow.
  3. The aims of R&D have been changing in the GIS. With the growing sophistication and complexity of the new products and services available in the information society, it is becoming ever more necessary to concentrate on designing products and services which people can use, and indeed will want to use. It is not the accumulation of raw data which is crucial so much as its innovative use, a use which necessitates the integration of potential end users into R&D activities and the testing of research results in the field. Many of the basic technologies required for the information society are already sufficiently mature to make a start on developing advanced applications but further development is needed so as to fully meet citizens' needs. The significance of application-oriented research is increasing dramatically in the information society. This is not yet being sufficiently taken into consideration in the structure of the national research budgets of the CEEC.
    While it is true that, as was the case in Japan in the immediate post-war years, some economic growth can be achieved in the CEEC by "technology transfer" - i.e. the adaptation of technologies and applications developed elsewhere - many of the needs of a given market will be local in nature and will require technologies and applications, and hence R&D, specific to that market. The technologies need to be adapted to the specific conditions in each of the CEEC to achieve real productivity gains and to successfully solve current problems. In this context, more emphasis needs to be put on the dissemination of research results.
  4. R&D will be vital to the CEEC in their bid to achieve economic "take-off" and establish their place in global markets. History also shows that only the countries which have the easiest and cheapest access to technologies developed elsewhere will be able to offer the fruits of their own developments in exchange. This is another significant reason why R&D in the CEEC has to be maintained and promoted.
    R&D can help to manage industrial change. Upgrading professional skills, improving training and giving examples of "best practice" in organisation and manufacturing will help to tackle transitional problems. R&D has to play an active role in all of these. The PHARE programme is designed to support the process of transition into the information society. For this, R&D on its own is not enough. It is a necessary, but not a sufficient, condition of the development of the information society. R&D is crucial in producing new technologies and hence new applications - but only the marketplace can decide which applications succeed or fail. Equally, however, people at their workplaces as well as users must learn to use the new technologies. It is therefore equally important to adapt ICT to the specific needs of citizens and of society as a whole.
    Ultimately it is users who will decide the shape of the information society. The choices they make as to the products and services they want will determine which innovations become the most successful applications of the twenty-first century and which innovations, like the airship as a means of intercontinental travel, become interesting footnotes in historical textbooks. It follows that developers of new applications must be "market-aware". R&D must support the whole process of bringing new technologies all the way from the drawing board to the marketplace.
  5. While there are issues relating to R&D common to all the CEEC, nevertheless the diversity of this region has to be recognised - just as the EU itself forms a diverse area, as the statistics on penetration of information technology and communications devices show.
    One of the problems affecting R&D, common to all the CEEC is the so-called "brain drain" of skilled personnel, a process which erodes their scientific base. Researchers are among the most mobile members of society and have highly portable skills. There are considerable temptations for researchers to go abroad to work, either to gain access to better R&D resources and facilities or simply to better their standard of living, or both. This problem is not unique to the CEEC as proven by the high number of EU researchers working in North America.
    The CEEC are, however, not only confronted with the migration of scientists. Worse than that is the fact that a great number of capable researchers have left their institutes and changed their professions, thus a form of internal "brain drain" is further eroding the R&D structure of the CEEC. Often it is the most valuable employees who leave in search of better paid jobs, often not at all related to their field of education and job experience. This has led to a considerable waste of valuable expertise.
    A related problem has been the lack of funding available from governments. The transition to a market economy has imposed increased social burdens on governments and thus has put other forms of public spending under pressure. The proportion of Gross Domestic Product (GDP) devoted to public R&D has declined in almost all the CEEC. This is made worse by the fact that R&D funded by the private sector is still relatively poorly developed. Only a few enterprises have their own research laboratories. Due to increasing foreign takeovers of domestic companies, there is even the increasing danger that existing laboratories in the CEEC will be closed - which implies a further loss of skills. This poses the overall danger of the CEEC not being able to particpate actively in the development of basic technologies, and only being able to use applications after a long time delay - which would result in competitive disadvantage.
  1. To prepare the CEEC successfully for the GIS, there is a need for action, both at national and European levels. At national level, it is important
    A1: to establish forums and national panels on the GIS
  2. The CEEC are asked to establish forums and national panels to prepare the development of nationa lstrategies towards the GIS.
    A2: to develop and adopt national action plans to build the GIS
  3. The EU should be prepared to start a structured dialogue with the CEEC to facilitate the establishment of such action plans in order to achieve the highest possible coherence.
    A3: to strengthen the role of R&D, especially of ICT, in economic modernisaton
  4. European support (e.g. PHARE) is available to develop and strengthen the infrastructure for R&D in the CEEC. The CEEC are urged to use their existing potential to its greatest effect in order to give R&D a higher priority in overall economic development.
    A4: to actively support cooperation with the EU on R&D and experimen- tation, especially by promoting private-public partnerships and joint ventures

B. To strengthen R&D Collaboration between the European Union and the Central and Eastern European Countries

  1. The R&D programmes of the EU are open to participation by the CEEC, and such participation will be vital in promoting the GIS in Europe. During the past few years, many projects in the CEEC have been supported by the research budgets of the EU, above all through stabilisation and improvement of the research environment. In addition, the Fourth Framework Programme has been providing, since the end of 1994, direct support for a number of projects. All such projects are rigorously vetted for the excellence of their proposal presentation and their involvement of partners from different European countries.
    Legally constituted bodies carrying out R&D activities, such as research centres, industrial concerns, small- and medium- sized companies, universities etc., which are established in the CEEC, are eligible to participate in the Framework Programme activities either under the specific programme for International Cooperation (INCO), or under the specific programmes designed for cooperation within the EU (Activity 1) on GIS-related topics (ESPRIT, ACTS, Telematics, etc.). In the case of INCO, proposals for R&D projects are submitted through public calls for proposals (INCO-COPERNICUS calls in 1996 and 1997) with the general aim of promoting cooperation with the CEEC and specific objectives including the safeguarding of CEEC R&D potential, solving problems specific to the CEEC and industrial applications of R&D. In the case of Activity 1 programmes, the focus is on cooperation within the EU, and the participation of the CEEC is encouraged in the context of their progressive integration into the EU. In order to finance these activities, around two thirds of the funds available from the Fourth Framework Programme, as a general rule, should be devoted to INCO-COPERNICUS activities and one third to finance CEEC participation in Activity 1 programmes.
    The relatively high barriers to European research support have so far only permitted a comparatively low participation in the research programmes of the EU.
    There are four main reasons:
  2. Fourthly, lack of knowledge of potential partners from the CEEC or even low levels of interest in cooperating with them.
    Any successful strategy to strengthen participation of the CEEC in EU R&D programmes needs to start by addressing these weaknesses and developing suitable approaches for resolving them.
    1. The first priority would be to develop actions for awareness building on existing programmes, including the legal framework which underpins EU funding mechanisms. New concepts should be developed for "information days" on EU R&D programmes, to be conducted in concert with the partner countries, and focusing on selected target groups. Another primary aim is to establish "dating agencies" to bring together partners from different countries and from different sectors of the economy, including, in particular, SMEs, users and private laboratories and to assist them in the process of finding suitable partners. Existing research networks should be used and further developed for this purpose. Finally, a joint "GIS information desk" should be established as a platform for information exchange and for additional support in the awareness building process.
    2. Better information is necessary, but to achieve real improvements, the question of co-financing of joint projects needs a satisfactory resolution. This will determine the eventual share of the CEEC in EU R&D programmes. R&D consortia need a guarantee that the necessary funding resources under the Fourth Framework Programme, PHARE or under national programmes are indeed available. The very limited funds of the INCO-COPERNICUS programme are, however, not sufficient to provide a satisfactory resolution to the problem of co-financing in order to achieve a stronger CEEC participation in EU R&D programmes.
      The aim of EU R&D programmes is to foster industrial competitiveness, both inside the EU and in cooperation with outside countries and organisations. They are not designed for the purpose of development aid, whether in the CEEC or anywhere else. There are, however, EU programmes which do address this area - in the context of the CEEC, the relevant programme being PHARE. PHARE funds are available for R&D activities and infrastructure, depending on the national priorities of the CEEC. Besides that, awareness building, the promotion of ICT standards and joint pilot actions for building the GIS may be funded. National priorities must therefore include R&D. These funding possibilities should be more frequently used and more specifically targeted. The funding criteria should in this respect be applied as flexibly as possible in order to smooth the way to the GIS for the CEEC. In addition, it is possible to envisage the creation of a special programme concerned with R&D infrastructure.
    3. The objectives and procedures of the various EU R&D programmes are legally clearly defined; there are no legal barriers restricting access for the CEEC to EU R&D programmes. The modalities of the individual research programmes are, however, different in each case - which does not allow an easy examination of the overall situation. In general, the existing rules do allow sufficient flexibility to react appropriately to the specific needs and priorities of the CEEC.
      In order to fully utilise the existing potential for research cooperation between the CEEC and the EU, a close political dialogue as well as an exchange of expertise is necessary. To achieve this, the informal participation of the CEEC in meetings of the research ministry council is of great importance; such joint meetings should be organised on a regular basis in order to be used as a political platform for intensive R&D cooperation. In addition, on a technical level, it should be examined to establish High Level Expert Groups that identify themes of common interest and that prepare special actions to promote greater participation of the CEEC in EU R&D programmes. As a first symbolic example of such increased participation of the CEEC in EU R&D programmes, the "Information Technology European Award" (ITEA) will be extended to include the CEEC.
    4. There is enough scope for enhancing the participation of the CEEC in EU R&D programmes by adapting their implementation to the specific needs of the CEEC. It is, however, vital that the quality of the proposals presented for funding is simultaneously improved. Therefore, a closer cooperation with research institutions and enterprises in the EU is necessary. Closer East-West research cooperation is also important for the urgently needed strengthening of privately financed R&D in the CEEC. In order to improve international research cooperation for the GIS, it is possible to envisage the inclusion of the CEEC in projects to build high-performance European research networks. As an example of cooperation of this kind, the participation of some CEEC research establishments in the European Research Consortium for Information and Mathematics (ERCIM) can be mentioned. Another example is the establishment of ACTS National Hosts in the CEEC which serve as distributed platforms for experimentation.

To strengthen R&D collaboration between the CEEC and the EU, it is proposed


B1: to establish High Level Expert Groups for consultation on EU R&D programmes on ICT


B2: to improve information on existing programmes, including information on funding possibilities

B3: to promote trans-European R&D partnerships, in particular involving small and medium enterprises

B4: to strengthen trans-European research networks

C. The Role of R&D Applications and Pilot Projects in creating the Global Information Society

  1. R&D does not and cannot exist in a vacuum. Scientists and designers must not be too remote from the markets for which the products and systems they develop and design are destined. Thus R&D must be application-oriented. To achieve this, the idea of using pilot projects to build small-scale versions of "real-life" systems is of crucial importance so as to test the new applications in a more realistic setting. It is not sufficient to simply develop advanced ICT as building blocks and tools for the GIS. What is important for their acceptance is that they are also affordable, easy to use and that they create added value for companies and citizens. Pilot projects, linking R&D, existing infrastructure and new use of existing technologies into the implementation of practical applications, should aim at demonstrating the potential of the GIS and stimulating its realisation.
    In building the GIS, experimental pilot actions are crucial to:
  2. manage industrial change.
    Nobody yet knows the exact future course of the GIS. What appears a likely market winner of today may totally fail tomorrow. What appears an unpromising new invention may prove to be highly profitable. To create the GIS, an open and innovative environment is necessary. Success or failure is not determined in laboratories. Pilot projects can help to find this out before expensive marketing activities are carried out.
    1. The Brussels conference of the G7 in February 1995 has contributed considerably to the process of building public awareness, in particular due to the pilot projects which the G7 countries agreed upon. The European Commission has taken the leadership in four of them. Other pilot projects, as described in the Bangemann report, are being carried out at both national and European levels. Much experience gained in this area is relevant to the CEEC who will, in some cases, be able to directly join in these projects. Integration into such pilot projects represents a "fast track" on the way to the information society, especially as financial bottlenecks can thus be more easily avoided.
      Of particular relevance to the CEEC is the G7 Global Inventory Project (as well as the European inventory), which aims to produce a database of existing national and international projects, studies and calls relating to the information society. This would allow the exchange of information on GIS projects in the EU and the CEEC, of expertise and the implementation of joint projects. In parallel, actions to build awareness in the CEEC need to be undertaken and enforced. It is understandable that the information society is not yet as much in the public eye as, for example, it is in the EU. A change of attitude is, however, necessary to build the required public climate for the creation of the information society.
    2. Because of the need to promote the private sector in the CEEC, GIS pilot projects centred around SMEs are of particular interest and relevance. The G7 Global Marketplace for SMEs project is an attempt to foster increased industrial efficiency in small- and medium-sized enterprises and to increase their participation in global trade by using distributed databases for information exchange. This is especially important for SMEs in the CEEC, not only for international suppliers, using electronic commerce, but also to build market-oriented distribution systems and to develop new services. Special efforts are therefore needed to integrate SMEs from the CEEC into such projects. For this, the existing networks for SMEs, such as the Euro-Info Centres, should be strengthened and better linked with the EU. Parallel actions to the GIS pilot projects have already been undertaken with a view to facilitating the CEEC joining e.g. in the field of the Global Marketplace for SMEs and in the MARIS (Maritime Information Society) project. These measures need to be reinforced and to be integrated into the EU strategies.
      Further cooperation possibilities are developing from industrial applications of ICT, e.g. in the framework of the IT programme of the EU (ESPRIT). These are "first user actions" to test innovative applications of information technologies. This requires a close collaboration between R&D and industrial users. How the integration of partners from the CEEC could be efficiently promoted in such projects needs to be considered. At the same time, this would present an important contribution to the restructuring of the economies of the CEEC and support the diffusion of best practice.
    3. Productivity gains and quality improvements will not only be possible in the private sector. Many of the new applications being developed can be used to transform the efficiency of public administration. Modernisation of public administration is at issue here. It is also necessary in the CEEC to promote collaboration in the area of "best practice" in public administration by using E-Mail for communications within and between governments and their clients; providing on-line services to the public; and further development of electronic transaction processing techniques.
      The use of networking, for example, can assist cooperation between administrations at an international level. Such systems are already widely used within the EU, and are essential in the day-to-day operations of many of the agencies of the European Community itself - for example in the pooling of police intelligence; in monitoring the safety of foodstuffs; in providing customs information; aiding the process of public procurement. A closer collaboration between administrations is equally necessary in the area of transport and road safety, for example in the development of reliable and effective early warning and traffic control systems. Programmes such as IDA and Telematics Applications foster the exchange of data between administrations across borders and push forward the modernisation of public organisations.
      The development of such information systems in the area of public administration within the CEEC and with the EU is critical to the pre-adhesion strategies of the CEEC, just as they are critical to the ability of the Member States to play a full role within the EU. In this regard, the existing funding possibilities of PHARE should be fully used for the building of European networks between national administrations. Large amounts of data are being collected, stored and used for different purposes by public authorities. This results in many new application possibilities for ICT, for example for storing and exchanging statistical, geological and geographic data or using data in public health services. The exchange of expertise between the EU and the CEEC on new innovative approaches to modernise public services needs to be supported.
    4. The main requirement in information society-oriented pilot actions is to bring together the right partners. Even more than with research, such projects need public-private partnerships. The public authorities act mainly as a catalyst in building the information society; the most decisive role must be played by private investors. It is therefore necessary to strengthen public-private partnerships as part of the economic reform process. The willingness of telecoms and industry - hardware companies as well as services, software and multimedia enterprises - to invest in the CEEC is high. Building the appropriate framework for private investment in the CEEC is a crucial political task which needs to be supported in the context of industrial cooperation with the EU.

To build the GIS in Europe, experimentation is of great importance in raising public awareness and learning from practical experience. For this, it should be envisaged


C1: to exchange information and expertise on GIS projects


C2: to support the organisation of conferences, workshops and showcases in the CEEC

C3: to extend experimental EU pilot actions to the CEEC

C4: to promote industrial cooperation based on the results of R&D


Summary

The countries of Central and Eastern Europe and the EU agree that the establishment of pan-European networks and services for a Global Information Society are of mutual interest. R&D is vital in enhancing the innovation process in the CEEC which is necessary to adapt the information and communication technologies to the specific needs of the CEEC as well as to explore new GIS applications and to implement them in the marketplace. In order to achieve this, the Working Group proposes an action plan with the following elements:


A. To prepare the CEEC successfully for the GIS, there is need for action, both at national and European levels. At national level, it is important


A1: to establish forums and national panels on the GIS

A2: to develop and adopt national action plans to build the GIS

A3: to strengthen the role of R&D, especially of ICT, in economic modernisation

A4: to actively support cooperation with the EU on R&D and experimentation, especially by promoting private-public partnerships and joint ventures

B. To strengthen R&D collaboration between the CEEC and the EU, it is proposed


B1: to establish High Level Expert Groups for consultation on EU R&D programmes on ICT

B2: to improve information on existing programmes, including information on funding possibilities

B3: to promote trans-European R&D partnerships, in particular involving small and medium enterprises

B4: to strengthen trans-European research networks

C. To build the GIS in Europe, experimentation is of great importance in raising public awareness and learning from practical experience. For this, the CEEC and the EU should agree

C1: to exchange information and expertise on GIS projects

C2: to support the organisation of conferences, workshops and showcases in the CEEC

C3: to extend experimental EU pilot actions to the CEEC

C4: to promote industrial cooperation based on the results of R&D