Who should finance science in Cuba?

source Juventud Tecnica

Who should finance science in Cuba: the State, the companies or both? The magazine Juventud Técnica published a transcript of the interview of Dr. Vilma Hidalgo de los Santos, deputy dean of research of Havana University in the Scientific Café of the Cuban Society of Chemistry dedicated to the management and financing of science in Cuba. The conference was held on June 22 of 2015 in the Bachiller y Morales Hall of the Universtiy College of San Gerónimo of Havana.

Thank you Montero*, Thank you all for your invitation that I have followed and agree with Montero that we could be more participative in the scientific and student community, regardless of the profession because, in the end, we are talking about all Cuban society.

This is not a conference; it is a reflection on the management and financing of scientific activity with a basic view on the economy. Although these reflections are not reduced to the university scenario, somehow incorporates my experience of two years in Havana University attending this area. I must be clear, however, that it is a technical discussion and does not represent the opinion of the institution.
I want to refer to three issues related to the management and financing of science that are very related:
- First I will try to answer of how viable it is to finance science in an economy; that is to invest resources in science, of human capital and innovation from a macro economic perspective.
- Second what are the basic elements through international experience to organize the management of science from an institutional perspective? I present some examples we could discuss.
- And finally, from a micro focus I would like to discuss the management of science in the university and research centers and their relation to previous issues.

Obviously I don’t intend to cover all elements in this brief presentation of such a broad and complex discussion. I will only present some to motivate the debate.

The economy has the theory of growth very clearly documented and is valid as an empirical evidence that there is a close relationship between knowledge and innovation, on the one hand and growth and economic and social development on the other. The figures reveal that countries that have grown sustainably have done so basically through innovation and technological leaps.

Certainly, innovation, seen from the generation of ideas to their incorporation for the creation and/or better continuity of the products and processes are not a function of specific industries but can be generalized in all economic activities. Innovation must not be understood as exclusive of sectors of high technology. But today we are referring to science.

Especially interesting is the recent experience of some developing countries, particularly the Asians, who have grown on the basis of knowledge and technology. These countries managed to increase participations of their exports in world commerce with a dynamic effort of high technological complexity.

In general, the sources of long term growth are related to investments in education, in infrastructure, in research-development and in innovation. Investing today in these is important to sustain growth and sustaining growth implies financing this investment. In other words it is a vicious cycle that must be understood otherwise it is difficult to adequately supply resources for this purpose, above all in a developing country with so many immediate emergencies.

However, it must be understood that there is no automatic relationship between investment and growth. Other things must be done, good combinations. You cannot invest human capital and not do it in science; you cannot invest in science and later lack an infrastructure, a technological environment to allow spreading knowledge and a proper added work force and technological complexity; or lack a regulatory framework and a specific economic policy of support of activities of high added value in technological complexity. There is a very important complementary element.

Additionally it is very important to have a strategic view point. To back these sectors always involves a risk investment. There are successful experiences in our country. The most important was the development of the biotechnological sector during the worse economic period (during the 90s) that was a successful decision. At the same time there is a complementary strategic view in a favorable climate for innovation. It must be said that there “is a reserve for the new plants to grow” and transmit information. It is not always possible to see which will be the successful industries or companies and, therefore, it is important to create a framework to capture information and on that basis make decisions to support those that effectively have more possibilities.

The institutional and regulatory frameworks are essential to raise the impact of the investment in knowledge on the growth through innovation. Within these it is very important to structure incentives. The economists well understand the mechanisms of incentives (or rules of the game) to boost favorable conducts for a definite objective. An objective can be declared but later there are mechanisms that conspire against it. In this case the incentives are not aligned and can be the main obstacle for innovation. Also in these circumstances control is very costly because the norms require certain conducts and the actors lack the incentives to ignore them.

In the case of Cuba there are factors commented that are influencing negatively and reducing the potential of science in economic growth. In contrast to other experiences Cuba has levels of human capital – the result of a successful educational and social policy of more than 50 years – that allows deciding for this manner of growth. In fact, the positive commitment has been empirically demonstrated as well as the significant growth of human capital in the growth of the revolutionary period. But since the Special Period the enrollment in specialties of basic sciences has fallen as well as the quality of education in general. To rescue this source of growth it is also imperative in a context of scarcity of resources and a complex demographic situation. The Cuban population does not grow and is basically qualified and aged that does not dismiss the generalization that moves towards activities of low intensive complexity in labor force. Consequently it can be expected that profits from productivity derives from the innovative capacity and development of intensive activities of knowledge with a higher added value.

Today, the levels of qualification and scientific potential contrast with a poor economic performances and, above all, are of a very low technological complexity as the GDP in exports. Several factors have an influence. In the first place the deterioration of the technological infrastructure, the weakness of the legal and regulatory frameworks and the system itself of science and technology as well as the scarce incentives for the development of science.

There is a contradictory scenario, a vicious cycle that must be broken and convert it into a virtuous cycle. Obviously understanding there is budget restrictions and resources that are scarce. What today is destined to investment in science implies sacrifice or recovery of other parts and the investment only recovers in the future. Similar to the family economy. There is budget that is committed to a specific destination that sacrifices others.

That is the "three by two” we economists must confront; the resources are scarce but a vicious cycle must prevent the loss of potential and economic stagnation.

Internationally we observe in the past few years that the countries with a dynamic growth (above 5% sustainable) have done so with investments rates above 20%. Cuba, after the 90s has investment ranges that go between 10 and 20% (before it was up to 25%) that definitely has an impact on science.

In general a recovery of investment in the Cuban economy is necessary to grow. But, as we have said before, we may be trapped in a vicious cycle of stagnation. The bulk of our GDP is destined to consumption in the homes – that cannot be lowered more – and public consumption that has an important component of social consumption. Given the low rates of growth, investment has been an adjustment variable. We do not have sufficient growth or, as we economist say, an insufficient capacity of internal saving to finance the necessary investment for growth. That is why the need to close the breach between external financing and it must be clear that countries that do not invest compromise growth.

In comparison, Cuba appears with a level of education similar to developed countries but, in general, these reflect a better balance between expenditures in education and in research-development. Unfortunately many former socialist countries that achieved high levels of education now reflect very low expenditures in education and science. This has not been our case. We must position ourselves in a road where there is a better balance considering that right now we do not grow very much, being more efficient and designating a little more in research- development.

On the contrary, human, scientific and innovative potential deteriorates as well as its impact on the economy and society. And what is worse it stimulates a drainage of qualification to activities of a lesser complexity but better paid or toward migration abroad. The migration of a qualified labor force has become a subsidy for the redptor countries. In other words, Cuba makes an extraordinary effort to dedicate a part of its scarce resources in education and the benefits of this investment are received by other countries.

Also it is neither efficient nor less socially acceptable that persons highly qualified, sometimes specialists in very complex fields must spend time and effort in activities of low qualification to complete their incomes. It is a problem we are confronting and quick solutions should be found. There are actions that are in our hands to gradually correct these problems. And, sometimes for bureaucratic reasons, for dogmatism or lack of imagination and creativity there is no advance towards solutions.

But this also requires dedicating space to the subject of organization of science and in financing. There are some basic principles for this. First priorities must be defined because science is expensive. The lines must be well defined according to the priorities of society. We economists often talk of “budget restrictions”. Also it is necessary to count on a functional institutionalism (in a broad sense) for objectives derived from the priorities and with instruments to finance them. In other words, the objective cannot only define wishes, but must be in correspondence with the resources and capacity to move them forward.

Priorities both in basic and applied research must reflect adequately the design of national, regional, territorial programs. To achieve this it is essential to improve the process of formulation, approval and functioning of the programs of research. A bureaucratic view point cannot be decisive neither in the short term but in science and strategy.

Institutional frameworks in a broad sense are very important; including not only the organizations of society but also the system of norms and procedures that rule the management of science. There are many international models from which to extract some ideas that are worth mentioning. For example the presence of specialized government agencies that is neutral regarding potential benefits. In other words must not compete for resources of the program. There cannot exist related parts to prevent inadequate incentives. Principles of participation, competition and transparency must prevail available to public scrutiny in terms of resources, etc. from the process of convening to evaluation of impacts. There are other basic elements such as incentives to promote alliances between institutions, generate chains of, multi disciplinary knowledge, among others.

Finally there are many instruments internationally that are used to finance programs. The sources are generally mixed (government funds, of international cooperation of institutions or companies). The agencies are occupied in capturing these different sources and channel them to the programs. The segmentation and absence of specific or nominal funds to finance national programs generates inadequate incentives. As for example, the flow of international cooperation that does not correspond to the priority of the receptor countries. International cooperation must be an instrument to favor development and must respond to common interests of the parts. It is important that these funds flow towards the priorities of investigation.

When we refer to financing in science it is about the capacity to mobilize resources – either obtained through foreign collaboration, budgetary or business – and support the priorities of investigation. There are other instruments internationally such as: bank credits to finance innovation and also some programs from the banking system dedicated to support (I+D+i) contracts of investigation and development between companies and research centers or universities; tax incentives for companies who invest in I+D+I and others.

It is a common practice internationally that the State reduces taxation of companies that invest in I+D+i and/or in training of its workers. This instrument is known as tax credits. They are not a tranference of funds for a company but more liquidity to stimulate these activities. Even in schemes of closed cycle (for example in companies of high technology); the companies need to externalize part of its investigation. Otherwise they are internalizing long range risks of their costs. Also universities or centers must stimulate nominal funds to finance research from the generalization of products or academic or scientific services. This last mechanism can become a strong incentive to boost science.

Then the view of management of science and its financing in a more specific plane can be a university or research center responds to the same points mentioned. Defined priorities organized in projects that respond to the interaction between capacities and social or economic demand of knowledge. It is not possible to finance an agenda that is the automatic sum of incentives of the researchers; sadly when there are scarce resources there must exist priorities. Formulate resources with a practical sense and vision of the future from a perspective of the investigators and in a dialogue with society.

The challenge is basically to construct an agenda of pertinent investigation derived from a scientific debate. The possibility of this interaction also resides in the institutional environment. There must be a stimulus of the networks to promote spaces of exchange between the investigators such as alliances between these and the companies or organizations (events, joint seminars, workshops, agreements of collaboration), contracts for joint productions; offices of technological transfer, scientific and technological parks and other elements of pseudo businesses, etc. At the same time, mobilize scientific potential towards these priorities requires motivation and social energy and also an adequate system of economic incentives (institutional and individual).

Speaking in terms of science and innovation there is an attempt to connect the actors (university and research centers, productive center, local agents, and others) whose relations of collaboration create synergies that boost the chains of knowledge from basic research to applied in the productive activity and thereby become important leverages of development.

At the same time decentralized elements must be strengthened with the capacity of management and centers to capture funds from different sources. Today there are many setbacks. In spite of the effort to integrate projects into national programs, the budgetary resources are insufficient and, in general, there is no purchasing power to satisfy these needs.

On the other hand very few companies demand knowledge and when this occurs there is no legal framework to allow I+D+i financing in centers or universities. Also the benefits of commercializing products, patents and services do not reach the investigators nor will the institutions be able to completely use these funds to strengthen the required infrastructure for scientific research.

As a whole there are many problems to articulate these required chains of knowledge and innovation in function of the economic and social development of our country. But also there are many ideas, and debates on the subject. It is about shedding the bureaucratic mechanism and rapidly implementing solutions using a collective intelligence and human potential and achieves more wealth for the economy and Cuban society.


Notes:

* Refers to Luis Alberto Montero, President of the Cuban Society of Chemistry.

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