Hungarian POLE programme funded by the European Union - Belgrade presentation (www.secep.rs)

1. Pole Program and cluster development
in Hungary
Mariann Teleki, Zoltan Bendo
Hungarian Pole Program Office
Cluster Workshop
Belgrade, 22 June 2010

2. Clusters and cluster programs before the Pole Program in Hungary
Findings
Cluster
development in Clusters with perceived operations ▪ Identified problems
Hungary before in Hungary before the Pole – General lack of trust and
2008 Program, 2007 (pcs) confidence among business
actors – as a result
▪ First cluster
inadequate number of
established in
business co-operations
2000
– Existing and successful
– PANAC –
business co-operations could
automotive
not count on stable policies
cluster
– Mixed experience and result
– Top-down
of cluster support programs
approach
– No consistent national policy
– EUR 200
on clustering
thousand
support from the
▪ Issues to handle
Ministry of
– Form of clusters
Economy
– Efficient operation of clusters
▪ Cluster call in
(professional cluster
2001-2002 from
management)
national sources
– Financing of clusters and
▪ Cluster call in
48 cluster projects
2005-2006 from Total
– Intellectual property
Structural Funds
problems
Source: PPO, EPAP, survey based on primary research and on relevant literature available in the field 2

3. The national cluster policy had to be formed as a consistent part of economic
development policies
Main challenges of the Hungarian Adequate responses in development policies
economy according to foreign practices
▪ Imbalance of the tradable and non- ▪ Development of macro and business
tradable sectors (overweight of non- environment
tradable sectors): – Stable business environment facilitating
– Decreasing export and efficiency
comptetitiveness ▪ Cluster development
– Growth rate lags behind potential rate – Co-operations of SMEs with proven market
– Low and stagnating level of successes can be visible and competitive in
employment international markets, as well contrary to single
SMEs
▪ Integration in the European economic - Cluster development policy shall help start a lot of
area determines the development path of new co-operations among business actors
the Hungarian economy in the next 10-15 - Cluster development policy shall help co-
years operations realise joint projects
▪ Innovation policy
– Innovation driven by market needs improves
international competitiveness owing to higher
added value
Source: PPO, EPAP 3

4. When laying down the concept of the Pole Program outstanding attention has
been given to challenges in R&D&I
Challenges of economic development in the field of R&D&I Responses of the Pole Program
▪ Macroeconomic aspect: ▪ Reaching at least EU average
– R&D expenses over GDP is well below EU average R&D spending over GDP
– Overweight of state R&D both in research staff and in financing ▪ Increasing innovation of
▪ Propensity of enterprises for R&D: enterprises
– Low propensity for risk and entrepreneurship ▪ Risk reduction
– Lack of trust and co-operation ▪ Clusters, enhancing trust
▪ Education: ▪ Education system sensitive to
– Moderate number of professionals in science and technology business needs
▪ Research: ▪ Tight co-operation of
– Brain-drain education, research and
– Gap between science and business, inadequate number of business
patents
– Universities oriented at basic research
▪ Financing: ▪ Increasing the number of
– Enterprises face slow, expensive and bureaucratic procedures opportunities for external
to get loans financing
– Lack of risk capital and business angel network ▪ Risk reduction
Source: PPO, EPAP 4

5. The Hungarian Pole Program as a coordination mechanism among OPs
ROUNDED VALUES
Business environment Enterprise and cluster
development* development*
Resource Support Resource Support
available granted available granted
(EUR million)** (EUR million) (EUR million)** (EUR million)
Economic 158 80 Economic 421 188
Development OP Development OP
Social 644 368 Regional 81 12
Infrastructure Development OPs
OP
Social Renewal 184 144 Social Renewal 11 20
OP OP
Total 987 592 Total 513 220
Consistent
Resources Coordination Communication
execution
* CHOP mirror calls are included in the respective convergence OPs
** 2007-2013, based on the list of the proposals calls as of August 2009, rounded values
Source: PPO, EPAP 5

6. The financial volume of the program amounts to EUR 1,441-1,662 million
Financial sources of the program (between 2007-2013, total)
250 HUF / EUR
Dedicated sources* ‘Plus point’ sources* ‘Indirect’ sources* Total,
+ + = EUR million
(EUR million) (EUR million) (EUR million)
341 146-205 5-6 492-552
175 6-9 2-7 183-191
72 0 0 72
33-57 119-141 24-80 176-278
366 140-168 12-35 518-568
Total 987-1,011 Total 412-523 Total 42-128 1,441-1,662
▪ The financial volume of the Pole Program amounts to EUR 1,441-1,662 million
▪ The major part of the sources is dedicated reaching EUR 987-1,011 million
*Dedicated sources: Tender calls, to which only Pole Program participants can apply
‘Plus point’ sources: Tender calls, where pole program participants are preferred with plus points in the evaluation process
Indirect sources: Tender calls, the results of which can have a positive impact on the Pole Program participants
Source: PPO, EPAP 6

7. Advantages of cooperation
Actor Activity Possible advantages
▪ Municipalities, ▪ Defining clear
Chambers of commerce development targets
and civil organizations SOCIAL AND ECONOMIC
▪ Coordination of ADVANTAGES
economic development
▪ Universities and R&D ▪ Running educational and
institutes research infrastructure
CREATION OF
▪ Building strategic KNOWLEDGE
relations
▪ Companies ▪ Sustainable development
▪ Achieving business and
development goals ECONOMIC GROWTH
Source: PPO, EPAP 7

8. Accredited clusters and development projects in the Pole cities
MISKOLC
GYŐR
BUDAPEST
SZÉKESF.- DEBRECEN
VESZPRÉM
SZEGED
Investment
promotion
Food industry
Healthcare
PÉCS
Environmental industry
ICT
Construction / Energy
Packaging
Innovation and technology parks
Infrastructural and IT development of a higher education institution
Agora Pole project in progress
Source: PPO, EPAP 8

9. Results of the main calls of the horizontal economic development pillar
Supported projects ROUNDED VALUES
Miskolc Debrecen Szeged Pécs Veszprém- Győr Budapest Support
Székes- granted*
fehérvár (EUR
million)
EDOP 1.2.2. NANOPOLIS Pharmapolis Genomic Helthcare Did not apply Did not apply Medical Bio- 50
Support of Innovation Pharmaceu- Innovation Innovation technology
innovation and Park tical Science Center Center in Pécs Innovation
technology Park Center 1st and
parks 2nd wave
SIOP 1.3.3. 2nd round of 2nd round of 2nd round of Not eligible 2nd round of 2nd round of Not eligible Evaluation in
Agóra Pole project project project project project progress
selection selection selection selection selection
SIOP 1.3.1. Complex Infrastructura Infrastructural ‘Science, Infrastructura Infrastructural 16 supported 185
Educational, renewal of the l development Please!’ l development higher
research and IT University of development of the ‘Science development of the Szent educational
infrastructure Miskolc of the University of Building at of the István institutions
development in University of Szeged the University Pannon University
the higher Debrecen of Pécs University
education
SROP 4.2.1. University of University of University of University of Did not apply Széchenyi BME 12
Development of Miskolc Debrecen Szeged Pécs István SOTE
knowledge University
transfer
SROP 4.2.2. Did not apply University of University of University of Pannon Széchenyi BME 28
Support of Debrecen Szeged Pécs University István SOTE
innovative University
research teams
Total 275
The Pole Program’s main horizontal development calls in the Pole cities
have resulted in a total support amount of EUR 275 million up until now
*SIOP = Social Infrastructure Operational Program,
SROP = Social Renewal Operational Program,
Source: EMIR, PPO, EPAP EDOP = Economic Development Operational Program 9

10. The manual includes the main definitions of the cooperation based on
the relevant literature - but it does not consider any of them compulsory
Cluster manual – cluster definitions in the international literature
Introduction of  Porter (1998): „ Clusters are geographic
the Pole Program concentrations of interconnected companies,
specialised suppliers, service providers, firms in ● The Pole Program
related industries, and associated organisations does not define a
Institutional (such as universities, standard agencies, trade cluster definition
system associations) in a particular field linked by ● The clusters which
commonalities and complementarities. There is fulfil the Program’s
goals will be
Cluster competition as well as cooperation.
accredited
methodology (accredited
 UNIDO: „A cluster can be defined as a sectoral and innovation cluster)
geographical concentration of enterprises, especially
Small & Medium enterprises (SMEs), which have ● The Program does
common opportunities and face similar threats” not aim at the
Practical monopolisation of
information the cluster term – the
 European Commission DG Enterprise: „a group of non-accredited
independent companies and related institutions, clusters may also
which compete and co-operate at the same time; count for
Enclosures which have a geopgraphical concentration in one or considerable
more regions; which specialise in a particular field development
linked by common technologies and or skills; cluster resources
can be science based or developing in traditional
sectors”
Source: Porter, UNIDO, DG Enterprise and Innovation, PPO, EPAP 10

11. Global economy is based on clusters instead of individual companies
according to the common sense on global competition
Positioning of the clusters
Cooperation  The cooperation is successful if it
has advantage for all participants
Company1
Members of the  They do not give up their
Munici-
Company 2 University pality cluster individual goals
 They act together
Company 3
Cluster  They take local advantages:
Company 6 manager – Cost reduction
Company 5 – Fostering innovation
Company 7
Company 4
– Getting know best practices
Company 9 – Minimising transaction cost
Company 8
Support  The target-oriented and tailor
Company n made support of the clusters is a
focal point in the Pole Program
● Support alone is not enough for the success of clusters
● Only self-organized cooperations which are based on mutual advantages can give a real
answer to the challenge of the global competition
Source: PPO, EPAP 11

12. The role of the cluster management (CM) organization and the practices of the
governance of clusters should be analyzed
Cluster handbook – Cluster operational model
Cluster member
CM organization Area to be Freely shaped structure Cluster
• Acts in the interest of the influenced ● The cluster organizes
members freely and can choose
any form (association,
• Its services are business atypical contract,
oriented CM Governance foundation)
Services and
• Controllable ● Its government and its
Compensation
decision making
• Evaluable processes are defined by
the members
• Transparency in its
operations for the Cluster
members and for the ● The cluster controls
institutional system directly or via a contract
the CM organization
The result is a cluster development system model that can be interpreted in the same way by all
stakeholders
Source: PPO, EPAP 12

13. The cluster manager provides services for the cluster members based on their needs
Possible tasks of the cluster management organization
Possible tasks of the cluster manager
 Joint pressed or electronic informational  The primary goal of the cluster
Joint materials manager organization is to
appearence  Common webpage provide services for the members
 Representation of the cluster on events of the cluster
 Organization of meetings and events
Improvement of the  The rules of the cooperation may
cooperation  Databases
be included in a service contract
 Market analysis
 Patents, licenses,
 Partner database
 Competences The cluster manager organization
 Project management is not the main decision body of
the cluster – way of decision
 Strategy elaboration and audit
making is defined by the
 Benchmarking club members
 Trainings, educational programs
Services
 Advisory  It is advisable that the
 R+D operational form of the cluster
manager meets the requirements
 Legal and IP rights
of transparency and verifiability –
 Tender in governance and finance as
 Translation well
 Marketing
 International study trips
Source: PPO, EPAP 13

14. Parameters of call for proposals for clusters in the four development phases
Development Subsidy/project Supported Source of
level (EUR million) activities funding
Pole 6-17 ▪ Services ▪ Economic
4th Innovation ▪ Investments Development
Clusters ▪ Joint R&D OP*
projects
Stage 4
Accreditation
3rd Accredited ▪ Joint R&D ▪ Economic
clusters 1-6 projects Development
OP
Stage 3
Accreditation
2nd Developing
▪ Cluster ▪ Regional
0.15-0.6 management OPs
clusters
▪ Joint services
and investments
▪ Regional
1st Start-up ▪ Cluster OPs
0.02-0.15
initiatives management
▪ Joint services
* Operational Program
Source: PPO, EPAP 14

15. Cluster development – Results
ROUNDED VALUES
Number of clusters Successful Support
Development and co-operations* applications granted
level (pcs) Calls for proposals (pcs) (EUR million)
Pole ▪ Under elaboration - -
-
Innovation
Clusters
Accredited ▪ Two dedicated calls for
18 proposals in EDOP
clusters
Altogether 63 projects in 12
accredited clusters have been 63** 49
supported up until now
Developing ▪ Developing calls for 21 5.3
21+
co-operations proposals in the Regional
OPs
Start-up co- ▪ Start-up calls for proposals in 79 8.0
opeation 79+ the Regional OPs
initiatives
▪ Total 163 62.3
EDOP = Economic Development Operational Program
ROPs = Regional Operational Programs
* No of supported clusters and co-operations in the calls of the Regional Operational Programs and the accredited clusters
** Applications received and evaluated till 31.12.2009
Source: SMIS, PPO, EPAP 15

16. Supported clusters in the ROP* start-up cluster tenders
In the ROP start-up cluster tenders 79 applications have
been approved, with a total support amount of EUR 8 million
* Regional Operational Programs
Source: PPO, EPAP 16

17. Supported clusters in the ROP* developing cluster tenders
In the ROP developing cluster tenders 21 applications have been
approved, with a total support amount of EUR 5.3 million
* Regional Operational Programs
Source: PPO, EPAP 17

18. Sectors of the granted start-up and developing co-operations
Sectors of the granted start-up and developing co-operations
(pcs)
▪ There are 100 co-
operations for
which support
has been granted
▪ Energy,
machinery /
automotive, ICT
and
environmental
industry are the
most popular
sectors among
the supported
applications
Source: PPO, EPAP 18

19. Accredited clusters in Hungary (Stage 3)
Accredited clusters
Industry Number
Healthcare 8
ICT 6
Environmen-
6
tal industry
Packaging 2
Construction /
1
Energy
Food Industry 1
Investment
1
promotion
Total 25
▪ 25 clusters have been accredited up until now
▪ Most of the clusters operate in the South Great Plain and Central Hungarian region
▪ Most of the clusters operate in the healthcare, environmental and ICT industry
Source: PPO 19

20. Project companies founded by cluster members can be beneficiary in one of the
dedicated calls to clusters
Main parameters of tender call EDOP 1.2.1
Description
Amount of  EUR 1-6 million
subsidy  Each project has to reach a value of at least
EUR 2 million
Intensity  R&D: SME 50%; large enterprise 40%
 Cost linked to patents and intellectual property
rights: SME 50%
 Regional investment subsidy according to the
regional aid intensity map, but max. 50%
▪ The tender has been
No. of tenders  Only accredited cluster may apply called in January
per applicant  One cluster in one tender call may apply for 2009
altogether EUR 6 million with more projects
Applicant  Project company established by cluster members
who own the majority of its shares
Type of  R&D
subsidy  De minimis
 Investment
Source: PPO 20

21. Co-operation between companies is awarded by extra support ratio in the other call
dedicated to clusters
Main parameters of EDOP 1.3.1./B (Support of enterprise innovation)
Description
Amount of  EUR 0.06-1.4 million
subsidy
Intensity  R&D: small enterprise 45%; medium enterprise 35%;
large enterprise 25%
 If the project is realized in cooperation of
independent companies the intensity can be
increased by 15 percentage points
▪ The tender has been
No. of tenders  Without limitation called in January
per applicant 2009
Applicant  Only accredited cluster member companies
Type of  Innovation (mandatory content)
subsidy  Marketing (de minimis)
Source: PPO 21

22. First results of the calls dedicated for accredited clusters (Stage 3)
EDOP-1.2.1 and EDOP-1.3.1/B
Number of Number of the Average Total amount Average
projects applying number of of support amount of
(pcs) accredited received claimed support
clusters (pcs) applications (EUR million) claimed (EUR
(pcs / cluster) million / cluster)
No. of appli-
cations 101 15 6.7 82.8 5.5
Number of Number of the Average Total amount Average
projects supported number of of support amount of
(pcs) accredited successful granted support
clusters (pcs) projects (pcs / (EUR million) granted (EUR
cluster) million / cluster)
Supported
projects 63 12 5.3 45 3.8
▪ 15 of the 25 accredited clusters applied for support for innovation projects and 12 have
been granted support
▪ Successful clusters have handed in more than 5 winning projects on average and a
support amount of EUR 3.8 million has been granted for each of them on average up
until now
▪ ICT and biotechnology clusters have the most number of successful projects
▪ Accredited clusters from 6 regions have been supported up until now
Source: PPO 22

23. Final goal and success scenario of the cluster development by 2013-2015
By 2013-2015:
▪ 5-10 successful pole Parameters of a successful pole innovation cluster
innovation clusters will ▪ It consists of 30-35 SMEs and has multinational members
operate in Hungary ▪ It exports to several countries of the world
▪ It contributes to the employment growth primarily by the
▪ All of them will reach a creation of highly qualified jobs
significant market share in ▪ It operates in one of the most profitable segments of the
their respective markets in industrial value chain
Europe ▪ It has strong and live international relations with foreign
▪ All of the successful pole business and academia
innovation clusters will be an
organic part of the global
industrial value chain
Strategic steps between 2009-2013:
• Elaboration and introduction of the pole innovation clusters in the cluster development model
• Strong support for the internationalization of the Hungarian accredited and pole innovation
clusters
• Gaining synergies from the tight connection of the cluster development pillar and the horizontal
economic development pillar of the Pole Program
Due to the successful clusters the focus of the Hungarian economy shifts
to activities with higher added value than presently
Source: PPO, EPAP 23

24. General introduction of the Stage 3 cluster accreditation
Overview
Aim ▪ Select and classify the clusters that:
• The accreditation of
▪ Are able to reach significant international and
clusters is a rigorous
domestic performance
expert evaluation
▪ Have further potential remarkable opportunities
system with the aim of
▪ Are not rent-seekers
selecting the most
Duration ▪ The accreditation license is valid for 2 years promising initiatives
▪ After 2 years the license has to be renewed
• The Accreditation
Committee comprises
Frequency of the ▪ Continuous application
of governmental
accreditation ▪ Cluster accreditation quarterly
decision makers and
reputable economists
The ▪ Sole right for applying for dedicated pole program from the private sector
accreditation sources
entitles for ▪ Advantages and preferential treatment in many calls for • Due to the
proposals (extra points in the selection process) considerable EU
▪ New members of the cluster (joining the cluster after the development sources
accreditation) can benefit also from the above the accredited clusters
advantages can play an important
▪ The clusters successfully going through the role in Hungary’s
Accreditation sustainable
Certificate accreditation process receive a certificate
development
Source: PPO, EPAP 24

25. Structure of the Stage 3 accreditation model
# of criterion Goal of the criterion group
▪ Evaluation of the forms and content of the ▪ The accreditation
I. Cooperations in ▪ 10*
the cluster cooperations in the cluster model is based on
quantitative and
qualitative criteria
that have been
II. Members of the ▪ 2 ▪ Analysis of the sort and number of cluster determined by
cluster members experts and have
been tested on
▪ Examination of market-proven success with operating clusters
III. Business ▪ 5
performance of the emphasis on the export activities and high
added value ▪ The model is a
SME members 35 coherent
evaluation system
▪ Analysis of R&D activities in the cluster grouped to five
IV. R&D ▪ 4 subcategories
performance
▪ The model aims to
▪ 14 ▪ Analysis of the cluster’s vision and strategy select
V. Strategic and cooperations
operational plan ▪ Filtering the cooperations without relevant
content which reached
market-proven
success
Source: PPO, EPAP 25

26. We were testing and scaling the Stage 3 accreditation model on a basis as
wide as possible
No. of clusters in the survey Breakdown of clusters (relevance Final number of clusters
(pcs) in the Pole Program) (pcs) involved in the scaling (pcs)
56 Good
potential to
acquire the 8 5
accreditation
Not relevant 34
title
Developing 8 3
Relevant 22
Start-up 6 2
10
▪ Close and iterative co-operation during the testing between the PPO and the clusters
▪ Data provision on voluntary basis from clusters
Source: PPO, EPAP 26

27. Top stage of the cluster development model (Stage 4) – Pole Innovation
Clusters
▪ The Government expects the followings from the Pole
Program:
Development No. of clusters and co- – Enterprises increase in size through networks and clusters and
level operations* (pcs) co-operation with academia so that they become competitive on a
European scale
Pole innovation – Clusters increase substantially the competitiveness of the
clusters 5-10
Hungarian economy through high value-added and export-
oriented activities
▪ Expected results:
– 5-10 successful Pole Innovation Clusters will operate in Hungary
by 2013-2015
Accredited
18 – All of them will reach a significant market share in their respective
clusters
markets in Europe
– All of the successful pole innovation clusters will be an organic
part of the global industrial value chain
– SMEs get stronger (international competitiveness, development
potential, potential to become reliable, long term supplier)
Developing co- – The structure of employment improves
operations 21+ – The role of the regions increases through the strengthened Pole
cities
▪ Supported activities: joint R&D projects, services, investments
▪ Subsidy for supported cluster or project:
Start-up co- EUR 6-17 million
operations 79+ ▪ Support available till 2013: EUR 80-160 million
▪ Aim: Complex background infrastructure for the most successful
clusters and joint R&D projects
* No. of clusters and co-operations supported in the ROP co-operation (cluster) calls; the accredited
clusters; the expected number of Pole Innovation clusters
Source: PPO, EPAP 27

28. Top stage of the cluster development model (Stage 4) – Pole Innovation
Clusters
Entry ▪ Potential clusters must have a track record of 3 years and a 1-year-
criterion long accredited operation before the application
Validity ▪ For 3 years from getting the certificate
The Stage 4
Focus on the ▪ The Pole Innovation Cluster stage requires active participation of accreditation
examination large companies therefore the examination of economic performance call should
of economic shifts from SMEs to the total performance of the cluster including large
apply similar
performance companies
▪ The economic performance and the potential competences of the cluster content and
have to prove the ability to fit in the final goals of the Pole Program structural
criteria as the
Evaluation ▪ Realistic expectations should be defined based on the present Stage 3
criteria to performance and the future potential of the accredited clusters
accreditation
use ▪ New criteria will be applied to measure the economic performance of
cluster member companies and the R&D&I performance of the cluster call but it
▪ Some of the criteria from the Stage 3 accreditation will be used with should set
modifications, while some will be deleted based on experience higher
requirements
Strategy and ▪ The strategy and action plan has to be a key factor of the evaluation
and it should
action plan ▪ Project descriptions form part of the strategy plan
▪ Professional external experts to be assigned for evaluation be stricter
▪ Pole innovation clusters shall present the strategy of the cluster for the
Progress Accreditation Committee when judging on the pole innovation cluster
report title. Further, the cluster shall present annually on the progress for the
Accreditation Committee
Source: PPO, EPAP 28

29. Updated cluster manual
The updated cluster manual is available from September 2009
Source: PPO, EPAP 29

30. 27-28 January 2010: International cluster conference in Budapest
Source: PPO, EPAP 30

31. www.polusprogram.eu
Source: PPO, EPAP 31

32. Thank you for your attention!
polus@polusiroda.hu
www.polusprogram.eu