Technology & Pharmaceuticals: Innovation struggles in indifferent economic climate

By Lubomír Sedlák and Daniel Bardsley

Promoting innovation among Czech companies remained a priority in 2012, with the government keen to see manufacturers increase investments in research and development.

Yet with many firms suffering mediocre sales performances, the climate was less than conducive to growth in R&D spending.

Industrial output fell in five of the first 10 months of this year, with the lowest drop being the 7.1 percent reduction recorded in September.

"The results are slightly worse than expected, but they are not very surprising. Our poll has shown the third-quarter and September results will be the weakest in the past two years," Bohuslav Čížek, a Confederation of Industry analyst, said in November.

The country is halfway through its National Research, Development and Innovation Policy initiative, which runs from 2009 to 2015 and includes among its objectives the creation of a "pro-innovation environment."

"Those local companies that sell best are competitive thanks to, among other things, the technical level of their products," said Tomáš Paták, a spokesman for the Industry and Trade Ministry.

Among the innovation hotspots in the country is the car industry, with significant investments in fuel systems, and with Škoda Auto having tripled the number of its employees involved in research and development since 1989. IT is another R&D highlight.

Despite more than half of the Czech Republic's $3.1 billion pharmaceutical sector being focused on the production of generic drugs, innovation has also thrived this year.

In October, Dolní Dobrouč-based Contipro debuted a device to generate nanofibers that can produce material resembling living tissues, potentially valuable for medical research.

Other high-tech manufacturers that have already developed a global customer base include a Brno-based producer of electron microscopes.

"They are manufactured by a purely local company called Tescan, which sells them all over the world," Paták said.

Yet the total number of private-sector companies investing heavily in innovation remains limited, according to Václav Havlíček, rector of Czech Technical University in Prague. The glass and textiles industries in particular have seen modest R&D spending.

Overall, R&D spending in the Czech Republic is about 1.5 percent of GDP, below the EU target of around 2 percent.

Indeed, Karel Aim, a member of the Academic Council at the Czech Academy of Sciences, said most local firms still rely on "competitive edges other than a high-tech innovation approach."

The struggles that manufacturers faced this year, and which discouraged R&D investments, partly stemmed from the indifferent economic performance of other EU countries, which accounted for 83 percent of goods shipped from the country in 2011. This year, the figure was expected to be only slightly lower at 81 percent.

Weaning the Czech Republic off its dependence on the EU as an export market was a priority this year, with the government launching its 2012-20 export strategy, which focused on markets such as Brazil, China and Iraq.

State sector investments in innovation, which have tended to focus on particular projects in industries such as aviation, health and nuclear power, have continued, while there have also been notable European Union investments in scientific research.

October saw the official launch of Biocev, the Biotechnology and Biomedicine Center of the Academy of Sciences and Charles University in Vestec.

Ultimately this will result in the building of a research facility just south of Prague, but already a major research program is under way at the Academy of Sciences of the Czech Republic's Institute of Molecular Genetics in the capital, in which strains of mice are being developed that can be used in genetic research to help improve the understanding of human disease.

Also, work continues to develop the Central European Institute of Technology in Brno, which, like Vestec, is eligible for EU grants that Prague is too well-off to be considered for.

Lubomír Sedlák and Daniel Bardsley can be reached at business@praguepost.com