Business - the driver of science
Such an approach is suggested by organizers of an online discussion “New Model for the Development of Science in Kazakhstan” that took place at the platform of the Elbasy Academy.
A team of young scientists believes that the problems in Kazakh science can be addressed by incorporating the approach of American colleagues based on such principles as open science and open innovations. The majority of countries with the successful development of science transitioned to a new model, where support for open science led to a breakthrough growth of innovations. Open scientific resources coupled with economic incentives became the main value for emerging companies.
Heads of ministers and state bodies, governors, and top management of the Atameken National Chamber of Entrepreneurs participated in the discussion of the suggestions made by participants of the program to train sectoral change managers.
Welcoming remarks were given by members of the Managing Committee of the program - Asset Issekeshev, Aide to the President and Secretary of the Security Council, and Kazakh Minister of Education and Science Askhat Aimagambetov.
Khalida Azhigulova, head of the Centre for Research of Human Rights, Inclusivity, and Civil Society at the Eurasian Technological University, represented the team of young scientists. She identified three major components of the new science model - economic stimulation of demand for science, primarily through tax incentives, support for university research, and availability of grant funding for science under the President. The suggestions of the sectoral team leader were supported by scientists from 11 countries at the forum organized by the team a week earlier. Reviewing international experience, Khalida Azhigulova noted that science management in countries such as the United Kingdom, Hong Kong, Canada, Lithuania, Singapore, the United States, Turkey, Finland, Sweden, South Korea, and Japan, includes the three basic pillars mentioned above in the organization of science.
“First of all, all these countries have quite effective tax incentives for funding research and development from the private sector. Tax incentives are the key motivation for private businesses to increase their engagement and cooperation with scientific centres and universities. China took a step further and has been offering grants-in-kind to high tech companies since the 2000s, including the construction of buildings, communications, and staff training, along with tax benefits. One of the good examples of collaboration between scientists and business is Loughborough University in the United Kingdom, whose techno park hosts 500 companies, both international and national, including Jaguar, Ford, Rolls-Royce, and sports companies Adidas and Nike. Instead of opening a separate research department, they are created on the basis of local universities, and with scientists, they work on the development of high-tech products and innovations,” said Khalida Azhigulova.
The team of young scientists consists of experts from the Nazarbayev University Graduate School of Education, a researcher from Syracuse University (the United States), Professor Bauyrzhan Bokayev from the Academy of Public Administration under the President of Kazakhstan and Yerbol Dyussenov, Ph.D. in Jurisprudence. Experts brought up the examples of successfully functioning funds for science under the government, including the Singaporean Simatek Fund, Finnish Sitra Fund that enabled the establishment of a world-renowned brand Nokia. At the same time, experts stressed that the funds are used for grant funding of fundamental scientific research. In Kazakhstan, the financial base can be generated by obligations for subsoil users.
As for the management of science, the experience of the Organization for Economic Cooperation and Development (OECD) countries, could serve as the example where 60 percent of all funding for science comes from private business, and up to 70 percent in countries such as China, Japan, and South Korea.
“In these countries, Ph.D. students have courses on entrepreneurship skills and opening start-ups based on the results of their own research. Moreover, such skills are acquired not only by scientists working in natural science, engineering, and technical sciences but also in humanities and social sciences,” said Azhigulova.
It is time to consider turning scientists into entrepreneurs.
Of 300 scientific institutions in the countries, nearly 100 are currently subordinate to the ministry, while the remaining 200 science and research institutions belong to other departments.
Chair of Human Capital Development and Social Policy Committee at the Atameken National Chamber of Entrepreneurs and Chair of the Kazakh Association of Entrepreneurs Talgat Doskenov believes that the Kazakh science lags almost 30 years behind the world. He suggested changing the status of the science committee but on the condition that it stays in the ministry and at the same time creating a separate science committee, possibly as part of the Scientific Council under the President.
“It is important for us to transform the role of a scientist in transition to business, in other words, the creation of the so-called hybrid identity. We do not have a definition for scientific entrepreneurship, which the law should probably have. Creative entrepreneurship is also important, which is based on what is not invented. A creative economy already exists in the world. Another important point is the development of in-house science within corporations. Not enough attention is given to it,” said Doskenov.
Idea factories, which refer to well-organized expert communities influencing the state policy, are widespread in the world. Today, scientists have no influence on it. The Scientific Council under the President of Kazakhstan, according to Talgat Doskenov, could become such a factory.
Head of Tax and Customs Policy Department at the Ministry of National Economy Azamat Amrin told about the tax policy and the existing tax preferences for scientific and technical activities in the country. He reminded that science belongs to the social sphere in Kazakhstan and is therefore exempt from corporate income tax. In addition, the land tax rate is zero for this category of taxpayers, and the property tax is calculated at a reduced rate of 0.1 percent, while the current base rate is 1.5 percent. Other incentives also include an exemption from value-added tax for research projects conducted under the government contract and benefits for special economic zones. There are also incentives for the financing of this field. For example, if an enterprise assists in scientific, technical and inventive activities, then these expenses also lower taxable income, and the received assistance will not be deemed as an income for tax purposes.
“This is what relates to the Tax Code. Today a lot has been said about the code on subsoil and subsoil use and that it obliges a subsoil user to allocate one percent from production expenses to research and development. It is also deducted when calculating corporate income tax. As you know, in his state-of-the-nation address on September 1, the head of the state said about the transfer of this money to the budget. The work is currently ongoing. We need to amend the Budget Code and the Tax Code because Article 255 envisions deduction if this money goes to scientific organizations and an autonomous cluster fund to finance projects of participants in an innovative cluster of a park of innovative technologies. We specify now that this money will go to the budget and through budget procedures, it will be transparent,” said Amrin.
According to him, these funds received nearly 23.5 billion tenge from subsoil users last year, including 14.6 billion tenge from the oil sector and 8.9 billion tenge from the mining sector. Similar budget contributions are expected in the future. He said that in this area consultations are conducted with government bodies and relevant amendments are made. Amrin also spoke about such an effective instrument to support science as an investment tax credit. It envisions deferral of tax obligations for three years for corporate income and property tax. That is, one more tool to attract new investors and launch industries in an effort to help enterprises get on their feet and develop.
Marat Sultangaziyev, Chair of the State Revenues Committee at the Ministry of Finance, said that domestic innovations have not yet become a driver of economic growth. At the same time, he believes there are resources for the commercialization of research and development
“Despite spending significant resources in taxes, the return is very small. Therefore, we need broad commercialization of domestic research and development. The support measures that target breakthrough scientific and innovation projects, as well as the commercialization of technology, will result in an expansion of the tax base for us as a fiscal authority. But for all the time of budget expenses and tax preferences, it has not happened yet,” said Sultangaziyev.
Tax incentives are used in OECD countries, China, Brazil, and India. However, the share of innovative products there ranges from 15 to 35 percent, while it is between 3 to 5 percent in our country. There is a need to increase the efficiency of innovation expenses and as international experience shows, it is namely business that should play a key role in financing and incorporating innovations, according to Sultangaziyev. He assured the participants of the online discussion that his department is ready to consider all suggestions if there is a need for additional preferences and concessions.
Demand drives science
Concluding the meeting, Director of Elbasy Academy Corporate Fund Farhad Kuanganov said tax benefits should be applied to businesses. He believes that a lack of tax incentives and an effective tax administration mechanism hinders the involvement of businesses. As we know, development starts where there is a demand. The program to train sectoral managers in change management to implement institutional reforms and 100 Steps - the Plan of the Nation was launched by the Foundation of Nursultan Nazarbayev. As part of this project, 200 sectoral experts are working to address tasks in 11 sectors of the economy to develop suggestions on its transformation.
