Ukrainian businessmen maintain that 80% of innovation project budget is paid as kickback to public servants.

Ukrainian businessmen with the successful experience in implementing innovation projects speak against state financial support to encourage innovations. This conclusion is based on the performances delivered during the public debate that was held last week by the Foundation for Effective Governance in partnership with Britain-based Intelligence Squared. The speakers discussed the motion: “State financial support is needed to encourage innovations”. As it turns out, there are many opponents to this statement.

Officials ready to help

According to state officials, public funding is a decisive factor for the development of innovations in Ukraine. While there is still no viable venture capital market in our country, the state remains the only sponsor to promote science and research. “Business is driven by profit, whereas science – by pure interest. Only the government can unite different interests into a single viable system and establish the national long-term strategic preferences”, said Volodymyr Semynozhenko, Head of the State Committee for Science, Innovation and Information Support and member of the National Academy of Sciences of Ukraine.

Advocates of state support to encourage innovations draw attention to similar projects in other countries. Among the favorite examples are Asian “industrial tigers” or post-war Japan. Another story of success is rapid progress made by European aerospace technology after the famous aeronautical and space centers EADS (owned by Airbus) were created largely due to public funding of scientific research and government contracts by EU institutions. Currently, the Russian government is sponsoring the creation of a scientific and technological complex at Skolkovo – the biggest innovation project on former Soviet territory.

Businessmen reject the offer

Businessmen, particularly with first-hand experience in implementing innovation projects in Ukraine, speak against state financial support. In their opinion, under the current circumstances, the Ukrainian government is unable to cope with this task. According to Anatoliy Girshfeld, Honorary President of IG UPEC, Ukraine cannot provide sufficient funds for innovations. This is what only the most developed nations can do.

Businessmen ask the state authorities to remove the existing barriers and let business do the rest. “The primary function of the government in the innovations process is to create incentive levers and mechanisms to support and develop the innovations market at the legislative level. Then business, being interested in improving competitiveness, will be more active in investing into innovations. This will launch the mechanism of high-tech production”, Mr Girshfeld stated.

Businessmen also question the ability of state officials to effectively select the innovation projects and make the best investment choices. Ukrainian public servants have failed to prove themselves as good managers in innovation sector – during the last years, very few qualified innovation managers were employed by the public sector. Corruption – another notorious issue in public-private relations also remains topical. “From 60% to 80% of innovation projects budget is spent on kickbacks”, notes Olexiy Skrypnyk, CEO of Lviv-based Elex, the company involved in IT innovations. He believes that it would be more effective if the state spent more money on education.

The Foundation for Effective Governance (FEG) was established in 2007 by Rinat Akhmetov with a mission to develop and implement long-term projects and programs which encourage Ukraine’s sustainable economic development. FEG is committed to help reach public and political consensus on the key areas of the economic transformation programs. To reach its objectives, the Foundation attracts leading Ukrainian and international experts, among them former Canadian Prime Minister Kim Campbell, former U.S. Senator Lincoln Chafee, former president of the National Bank of Hungary György Surányi, and General Director of the Ukrainian office of the Morgan Stanley International Investment Bank Igor Mityukov.