Industrial Transition reviews

The industrial transition reviews are the core activity of the Working Group. They follow the POINT methodology  that draws on expertise on system innovation and transition management, foresight, industrial policy and innovation governance. 
 
The reviews focus on an industrial theme of growing global importance suggested by the relevant territorial authorities, collect evidence from key stakeholders in the country and from broader international experiences and relevant literature, and support the development of adequate territorial responses that harness cross-portfolio complementarities and cross-stakeholder coordination.
 
Evidence collected from the reviews can further inform RIS3 design and implementation (e.g. refining or extending priorities, broadening the EDP, fostering synergies with other funding streams) as well as informing, and been informed by, industrial policies and other territorial strategies for economic and social development.
 
In each territory under review and for an industrial theme suggested by the authorities, the final outcome of the transition review is a report that will:
 

• Map the affected orientation, resource mobilisation, production and consumption systems in the territory;
• Document existing planning arrangements and directions of deliberate change of various stakeholders in the affected systems that could later form the basis for a broadly-supported transition vision;
• Make concrete suggestions for the advancement of the transition and for managing its downsides by fostering alignment and coordination within government. Given the nature and magnitude of the transition challenge, adequate territorial responses will include not just research and innovation policies that are already part of RIS3, but also industrial and employment policies more generally, including provisions for education and skills, for complementary large public infrastructures (e.g. in energy, transport, waste), urban planning, fiscal policy and social security reform, among others. Therefore, the recommendations of the review will place a particular emphasis on fostering alignment and coordination within government. 

 
More broadly, the reviews can be an input to a participatory process of stakeholder engagement leading to the development of credible positive visions for the future that can be the source of pride and inspiration for the region (or country) and a rallying point for the mobilisation of actors and resources from all levels.
 
See summaries of POINT Reviews below and full reports in the "Publications" section.

Countries and regions around the world are gearing up to make the industrial transitions that will be necessary to move towards sustainable production and consumption patterns. This report documents the findings of a review of industrial transition of Greece launched in 2019 in partnership with the Greek Ministry of Development and Investments, which follows the POINT (Projecting Opportunities for INdustrial Transitions) methodology of the JRC. The review explores some of the policy pathways that Greece might take as it moves from a dependence on fossil fuels to an economy that makes greater use of renewable sources of energy and exploits many of the opportunities that are arising in the production and use of batteries in the realms of transport and mobility, agriculture, shipping and defence. Sustainable energy and mobility will have a central role to play in maintaining (and restoring) Greece’s exceptional endowment in natural capital, which is the foundation for tourism and agro-food – two pillars of a still fragile Greek economy. Greece has at least some of the prerequisites to develop relevant industrial capabilities, namely large investments in human capital that have been sustained over many years; an internationally outstanding science base; pockets of relevant production capabilities; a positive momentum in foreign direct investment in recent years (albeit starting from a very low level), alignment of consumer demand with the direction of the transition and unprecedented EU financial support for the transition. Greece has innovation and production strengths in small, but dynamic production niches (notably parts of the value chains of renewables, batteries, small-scale shipbuilding and maintenance) operating within their respective internationally weak sectors.

These strengths have high potential complementarities with sectors underpinning the deep transformation of the global energy system towards renewables and the looming transition towards electrification of mobility, including in shipping. The review shows that some Greek firms are active in developing applications in areas of major economic importance (on account the considerable size of the domestic market), including, among others, renewable energy generation and distribution, ICT and energy solutions for non-interconnected islands, and shipping. In the absence of advance planning, however, there is no guarantee that a transition will lead to a diversified, knowledge-based and therefore tradable-intensive Greek economy, or that the benefits from the transition will be widely felt. Advance preparation, government leadership and wide stakeholder coordination, especially with the local communities that stand to gain or lose the most, are vital prerequisites. In view of the magnitude of the coordination challenge for national, regional and municipal policies and the narrowing window of opportunity, possible governance solutions may include a time-bound national mission ('a Greek Green Deal for Sustainable Industry and Quality Employment') coupled with regional or local 'shared agendas' for transformation. Drawing from international practice, the review examines possible policies and candidate tools that could potentially link these currently disparate sectors into a vibrant industrial ecosystem, including market creation measures (e.g. legislation incl. measures for its enforcement, land use regulation, provision of public infrastructures); support for innovation; vocational skills, public private partnerships for investment; public transport, energy and defence procurement among many others.

More information: Peer review on Industrial transition in Greece.

The JRC launched its Review of Industrial Transition of Andalusia in October 2019 in partnership with the Innovation and Development Agency of Andalusia and with the Andalusian Energy Agency. The review of Andalusia focuses on the nexus of renewable energy, energy storage (notably batteries) and their applications in logistics, smart mobility and transport. Using extensive consultation with stakeholders and expert analysis following a JRC methodology, the review seeks to identify paths for industrial development compatible with broad-based employment creation that is knowledge-intensive, environmentally sustainable and socially responsible.
 
In November 2019 a consultation meeting was held in Seville, with over 40 stakeholders, including representatives of businesses, trade unions, local and regional government, skill providers, universities, and lead technology users. Preliminary findings of the review of Andalusia were presented by the two experts conducting review, Heloise Berkowitz (CNRS) and Totti Konnolla (Insight Foresight Institute) in our last Working Group meeting in Brussels in December 2019. A second stakeholder consultation meeting has been postponed because of the pandemic. Work on the review is continuing, and completion of the final report will depend on the schedule of stakeholder consultations.
 
While the review is ongoing, some notable preliminary findings and policy reflections include the following:
 

• Andalusia has made great strides in the transition towards renewable energy which now accounts for about a fifth of the region's primary energy supply. Andalusia is supported in this transition by a strong network of public actors with high capacity to initiate and implement tailored policies, a strong university and R&D base, and a number of dynamic small companies with diverse energy technology portfolios including batteries, smart grids, solar photovoltaic, thermal solar and hydrogen. These achievements are even more notable as national framework conditions have been unstable and not always favourable to renewable energy investments.
• Andalusia however currently lacks a regional industrial champion that is able to operate at the level of scale necessary in many parts of the energy sector. Andalusian businesses can help fill this gap if they find ways to work together more and develop joint agendas for action. Other opportunities for policy development that can provide a timely response to this challenge include not only stronger support for regional entrepreneurship, but also and chiefly, the targeted attraction and facilitation of national and foreign direct investment. 
• Andalusia has an efficient policy delivery system, and a Smart Specialisation Strategy that has been effective in mobilising a broad range of policy actors and regional stakeholders. High-quality R&D and knowledge-intensive employment creation have been at the heart of industrial planning.  
• Innovation can play a key role in the transition. Broad-based employment creation can be supported with a complementary emphasis on non-R&D innovation capabilities in engineering, information technology, design, marketing and management developed with and within firms. 
• Vocational skills for the rapidly transforming energy and transport sectors, but also for digital technologies, will be important areas of policy development. The new strategies currently under preparation in Andalusia will benefit from a renewed focus on skills and can benefit from more and more tailored EU support (e.g. Centres for Vocational Excellence).
• The review recognises the role that consumers have played so far and seeks ways to harness the industrial opportunities presented by foreseeable consumer tendencies towards investments in renewables (especially rooftop solar), electric mobility and the sharing economy. Financial instruments such as crowdfunding may also have a role, especially in connection with community-driven initiatives (such as the energy cooperatives). Public procurement notably in public transport, demonstrator projects and awareness raising actions stand to produce shifts in demand that can accelerate the transition.
• The review seeks to identify good examples and suggest ways of promoting business models that support dignified, fulfilling and well-remunerated employment. As emphasised by stakeholders, these are not just relevant for manufacturing, but also for the construction sector, which accounts for a larger share of employment and will be central to the deployment of sustainable solutions.
• More broadly, the review is examining actions that could catalyse the transition, including the identification of a broadly inclusive vision for the nexus of energy and logistics, the development of ambitious local business partnerships, and the potential of follow-up actions to simultaneously address linked challenges such as international competitiveness, social exclusion and poverty, low levels of entrepreneurship, and low levels of social accountability. More information on preliminary findings HERE.

Understanding and Managing Industrial Transitions is a Working Group launched by the Joint Research Centre (JRC), which aims to support selected regional and national authorities facing major industrial transitions. The group has developed the POINT review methodology (Projecting Opportunities for INdustrial Transitions) to help countries and regions in transition achieve better results by identifying opportunities and challenges for their capacity to deliver system innovations. The Republic of Bulgaria, at the initiation of the Council of Ministers and the Ministry of Economy is now one of the four territories taking part in this exercise.
 

In Bulgaria, the review is analysing the current situation and also sketching alternative future directions for the country to tackle socio-economic and societal challenges. It undertakes a bold systemic innovation approach, aiming to propose a whole of government response but also involving the private sector and civil society stakeholders.

Bulgaria faces a number of socio-economic challenges that underpin the need for an industrial transition: 

• Low labour productivity and related low levels of income;
• Low share of high-tech production in the economy;
• A demographic crisis which leads to a shortage of labour and skills;
• Providing a high quality and healthy life for its citizens.

The focus of the POINT reviews is on a particular thematic area which holds the potential to leverage change to transform the production and consumption systems. The theme of interest as agreed by the national authorities is the linkage between mechatronics and the Bulgarian ICT sector in order to open up new pathways for digitalisation in society and manufacturing in particular. The theme coincides with the “twin ecological and digital transitions” as defined by the EU in the European Green Deal and responds to the country’s policy priorities. While this report focused more on the digitalisation strand, it bears in mind the two are interrelated and a similar assessment in the future might venture deeper into clean tech.

An important notion of this exercise is that the strengths in the Bulgarian ICT sector can contribute to the further digitalisation of the domestic manufacturing sector and in particular mechatronics. The reinforcement of the linkage can play a role to boost economic performance and create a platform for wider digitalisation in other areas such as green tech, telemedicine and tele-education. The government strategies that particularly impact these thematic areas and can trigger necessary transitions are the closely related digitalisation, Industry 4.0 and education policies. Mechatronics and ICT are priority areas of the current Bulgarian RIS3 strategies in all Bulgarian regions.

Having identified the key actors in mechatronics and ICT, their relations, and the framework conditions, in which they function, the review has examined four key functions of the system, namely: planning and orientation (including mostly government functions and key business stakeholders); resource mobilisation (with a focus on key knowledge provides and financing instruments); production of knowledge, goods and services; and consumption or use. This has entailed desk research, in-depth interviews and a stakeholder meeting in Sofia, which involved key actors in Mechatronics and ICT from the public sector, business, finance, education, intermediaries and other societal groups.

Planning and Orientation

Planning and Orientation relates to activities and processes focused on shaping the future ambitions for the country and regions. This consists largely of the multi-annual policy strategies of various government authorities that underpin the priorities for public investments. It also includes ambitions and plans of stakeholder communities and in particular parts of the business sectors (whether grouped in clusters or associations, leading companies or entrepreneurs) that develop a medium- to long-term vision for their economic activities in Bulgaria.

The POINT review has mapped these activities and the key actors involved. While there are many government strategies that affect the domain of mechatronics and ICT currently the most relevant policy document spelling out future ambitions is the National Development Programme: Bulgaria 2030. This comprises three different strategic goals: accelerated economic development, demographic upswing and reduction of inequalities. In particular, the Development Axis Innovative and Intelligent Bulgaria aim to increase coherence between education and the needs of business and society, raise digital competences, develop regional and local laboratories for testing new technologies and to build human, scientific, organisational and institutional capacity for Industry 4.0.

Resource Mobilisation

Bulgaria is a capital-poor country, both in terms of financial and human resources. The population is projected to shrink even further in the coming decades. Resource Mobilisation in general is highly dependent on the Operational Programmes of the European Union. R&D spending in Bulgaria is relatively low with 0,75% of GDP, although it has increased twofold in the last decade. On the positive side a relatively large share of R&D spending is from enterprises and has grown in recent years.

For the mechatronics domain the Operational Programmes Innovation and Competitiveness (OPIC) and Science and Education for Smart Growth (OP SESG) are particularly relevant. Many companies from the mechatronics sector have used these resources for research and innovation projects.

The government has used OP resources to create a stronger intermediary infrastructure in the innovation eco-system. The Centres of Competence and Centres of Excellence were set up under these programmes, following different business models. Most of these centres have direct relevance for the Mechatronics and ICT domains. Regional Innovation Centres (deferred to the next planning period due to the onset of COVID-19) and Digital Innovation Hubs have been set up to work directly with enterprises. As these centres have only been established in the last year, it is too early to demonstrate impacts on changing the transition paths of economic and societal actors. Nevertheless, in the future these organisations could play a larger role in the industrial transition process.

Education at all levels is an important factor to underpin capacity building for a smarter industry as well as for digitalisation of the economy and society. There are severe criticisms on the quality and quantity of education and training in Bulgaria from the business sector and these are confirmed by international studies such as OECD’s PISA. On the positive side the business sector is stepping in and initiating education and training initiatives privately. There is clearly a need for larger coherence between the needs of business and society on the one hand and programmes in higher education and training on the other, as is also noted in the Bulgaria 2030 National Development Programme. Another positive development is that the number of ICT-experts in Bulgaria is increasing and the number of people employed in ICT as well as the share in the national employment is growing. The international performance for both patenting and publication activity show that Bulgaria is still likely to rely on imported technology and fundamental knowledge to deliver on its industrial transformation. A critical aspect of any such transformation would need to include the upgrading of patenting and publication activity in ICT and mechatronics.

Production

Bulgaria has a history in both ICT and mechatronics dating back to the 1980s, which provides the necessary depth of the system for transformation.

In 2018 mechatronics covered 8,349 enterprises with a total turnover of € 8.9 billion, employing more than 162 thousand people. The enterprises in this sector have been actively using the Operational Programme Innovation and Competitiveness (OPIC) for R&D projects. They are amongst the highest R&D intensive companies in the country and those that used OPIC had higher operating revenues than other companies in the mechatronics sectors. Some of the large global multinationals in mechatronics have located manufacturing capacity in Bulgaria in diverse sub-sectors such as automotive, consumer products and general engineering. At the same time, local companies have been developing their sectoral governance structure by establishing their own cluster, which has been one of the more active, and has recently been awarded further support for innovation through the Operational Programmes.

The Bulgarian ICT sector has experienced steady growth in the last twenty years. This trend continued in 2018 when ICT generated €7.4 billion annual revenue and provided more than 127 thousand jobs. This represents an increase of 204% in revenues and 226% in number of jobs as compared to 2010, which significantly outpaced the growth of these indicators for the whole economy for the same period. In the period from 2010-2018 the fastest growing ICT sub-sector in terms of revenue have been “Computer programming, consultancy and other ICT services”. The sector shows a mix of multinationals, mostly in software development, indigenous companies, some with an international reputation, and many spin-outs and start-ups.

Shortage of skilled ICT staff is a persistent issue for the business sector and hampers the growth potential.

There is a large concentration of the mechatronics and ICT sectors in the Sofia region. Therefore, there is also a concentration of financial and human resource mobilisation in the capital region. Nevertheless, all regions, have selected mechatronics and/or ICT as a priority area in their RIS3 strategy.

For a transition path aiming to deliver higher incomes and wealth for Bulgaria both sectors offer good opportunities. A closer integration between these two sectors could reinforce and accelerate these opportunities. Today the competences and business capabilities of the ICT sector are mostly geared to the export markets and foreign clients. They have, only to a limited degree, been mobilised to enhance the digitalisation of indigenous companies, for instance in the mechatronics sector. For Bulgaria to embrace Industry 4.0 (smart industry) and a further digitalisation of the economy and society, these local ICT capabilities and expertise could empower this transition. In doing so, the ICT sector may have an opportunity to develop some of the capabilities necessary for upgrading its position within global value chains. The POINT review explores the extent to which there is a “business case” to make for bringing these two sectors closer together and what role different actors could play in this process.

Consumption (or use)

The domestic market for goods and services from the ICT and mechatronics products is small and not very sophisticated. Overall the low levels of digitalisation in society as well as in the business sector, as shown by most indicators of the European Digital Economy and Society Index (DESI), are currently a barrier for mobilising the domestic markets as an accelerator to commercialise higher value products and services from domestic suppliers. Public procurement for these products is also modest, although the ambitions to expand eGovernment and digitalisation in general could provide opportunities in this respect. It is therefore not surprising that many enterprises in the ICT and mechatronics sector are export oriented. It seems that the export patterns for mechatronics are fragmented across quite a number of unrelated product segments, so no dominant niches are prevailing at the moment.

Pathways for the future

The thematic topic for this review is broad and encompasses several elements of the Bulgarian production and consumption system. The levels at which ambitions can be formulated are:

1. Governance and policy level with better-aligned policies across portfolios resulting to an overall increase of public and private funding resources dedicated to the transition and coherent framework conditions, including, where necessary, with targeted changes to regulation.
2. Education and skills level: as the shortage of human resources and inadequate levels of skills and education are a major bottleneck, ambitions could be formulated to improve this.
3. Businesses: improving productivity, investing in digitalisation, value chain collaboration, entrepreneurship and so on are essentially tasks for the private sector. Ambitions need to be defined in quantitative and qualitative terms for the mechatronics dependent business sectors.
4. Business-to-business and business-to-public research collaboration: as this is at a very low level today, ambitions could be set to intensify these that is beneficial for the mechatronics sector and its digitalisation.
5. Overall, stakeholder coordination across the system needs to be intensified.  
6. Demand side: public sector investment and procurement in digital infrastructures, and infrastructures that support a green and sustainable growth can play a mobilising role.  The inevitable growth in the use of digital services by the general population, from its current low level, may also offer opportunities for business development and knowledge-intensive employment.

The numerical level of ambition is presented most recently in the National Development Programme 2030, which includes among others the following targets: (i) GDP per capita in PPS relative to the EU average, % , baseline 51.2 -> target 75; (ii) Digital Economy and Society Index (DESI), 36.2 -> 52.2; (iii) Variation in GDP per capita (in PPS) by region, %, 37.5 -> 34; (iv) Population (aged 25-64) participating in education and training, % , 2.5 -> 7; (v) Share of low performers in the Programme for International Student Assessment (PISA) (average for the three subjects of the study) 46 -> 25;  (vi) R&D expenditure, % of GDP 0.8 -> 2.5; (vii) Integration of Digital Technology, DESI, %, 18.1 - > 50;  (viii) Share of high-tech exports in total export, %, 5.9 -> 15; (ix) Ultra-fast broadband take-up, DESI, % , 9.7 -> 40; (x) 5G readiness, DESI, %, 0 -> 80.

The remainder of this POINT review project is aimed at identifying and elaborating new pathways to reach the abovementioned ambitions. The contributions from the stakeholder meetings on June 4th 2020 are essential to help formulate what these transitional pathways should look like and what can be done to reach their goals. More information: Preliminary Presentation (delivered in Working Group meeting on 9 December 2019). 

The review of Romania was launched in January 2020, in collaboration with national and regional authorities of Romania, in particular the Ministry of Economy, Energy and Business Environment, which is coordinating the measures of industrial transition in Romania. The review focuses on the theme: “Digitalisation (especially integrated solutions) for the fields of agri-food (smart farming and food traceability), urban development (smart and energy efficiency) and health (high quality services)”.
 
The review was initially organised to run from January to June 2020, and was subsequently extended until 30 December 2020, under an extension of the projects “Targeted Support to RIS3 in Lagging Regions” and “Targeted Support to RIS3 in Romania”, which jointly provide the review framework
 
A first two-day meeting for consultations with key stakeholders in Romania was planned for March 2020, but under the restrictions introduced by the COVID-19 crisis, it could not be organized in person and was replaced by a series of online consultations with key stakeholder groups that will take place early June. 
 
Prior to that, preliminary information about the key stakeholders involved in the sectors concerned by the review theme and their specific activities will be collected through an online questionnaire.