3. The share of allocated funds in the GNP and comparisons with other countries
The member countries of the European Union spend an average of 1.8% of their GDP for research and development; the United States spends 2.8% and Japan 2.9%. It should also be noted that the value system according to which allocations are made in Croatia is inadequate, that Croatia’s GDP is far lower than that of the developed countries, and that the funds for research and development are allocated by a state administrative body (the Ministry of Science and Technology). It should be added also that investments in research and development are in their very nature long-term outlays, and that therefore a prolonged neglect of this activity has long-range negative consequences. It is interesting to see the data on investment in research and development in the European countries, as shown in Table D (see Annex), where the countries are divided into four groups: (1) developed Western countries, (2) countries similar to Croatia in size and population, (3) countries in transition. The data show a significant positive correlation between the level of development of a given country and its investment in research and development.
Public universities. Public universities everywhere combine higher education and research and development functions, as is the case also in Croatia. Direct state funding represents the most important source of financing for public universities in all countries. Universities absorb between 48% and 100% of the funds for higher education provided for in government budgets (59% to 100% when expenditures for research and development are included). The prevailing mechanism of allocation of state funds is the so-called block grant to universities. Universities have a high degree of autonomy in distributing these funds. Most of the budget money goes for salaries, whose levels are to a large extent determined by the collective bargaining procedure between the government and the trade unions. The budget allocations are planned on an annual basis (fiscal year). In most countries the budget allocations for higher education are made separately from allocations for research and development. The funds for research and development are distributed by a separate body following an open competition for funds. In some countries, higher education and research and development funds are combined, reflecting the unity of education and research at public universities. In this case, the research component covers fundamental research in the disciplines taught at the university. In such a situation, the research money given to universities is only a small part of the total funds for research and development on the national level.
The available data for a representative sample of eight West European countries can serve as a desirable model for changes in the system of financing of Croatian universities. These data show: (1) that the dominant source of funding of public (state) universities which combine education and research is the central and/or local government budget (Denmark 94%, Finland 90%, France 60%, Germany 97%, The Netherlands 70%, Portugal 95%, Sweden 96%, Great Britain 57%); (2) that tuition fees are not a significant source of income for the European state universities; (3) that the so-called earnings realized in an open market are not yet a significant source of income for the European state universities.
Public institutes. Public institutes are funded from two main sources: from the budget (for ongoing research and development activities – basic salaries, basic overheads, operational costs, equipment, and capital outlays), and on the basis of additionally contracted projects. This system is used in Croatia as well, only the available funds are much smaller. In Croatia, the additionally contracted funds are allocated according to internal regulations, so that 70% of the money is used for the execution of projects and 30% for the so-called infrastructural expenses. The financing of public institutes is essentially based on the support for their research and development programmes, or projects, lasting three to five years, during which time their work and the use of the allocated funds are subject to evaluation. Since the research and development activity supported by the Ministry of Science and Technology is funded through research projects, for which between 17.2% and 19.8% of the Ministry’s budget for the universities and institutes is allocated, the institutes always receive decreasing and highly fluctuating amounts of money. Although predominant in the execution of research and development projects, public institutes always receive less money for research than the universities. In most developed European countries the situation is reversed because research is carried out at public and university institutes.
4. Conclusion
The inappropriate treatment of research and development institutions and universities in Croatia acts as an obstacle to more intensive research activity. The country has no medium-term or long-term vision of development, nor of research and development, while the short-term policy of research and development is inconsistent, which makes any meaningful planning impossible.
Funding for research and development is distributive in nature. The financing of the universities with lump-sum schemes is difficult. Although the present Law on Higher Education envisages the coordination of the financial needs and possibilities between the government and the scientific community in the Council for Financing attached to the Ministry of Science and Technology, the Council has for a number of years remained inactive, owing to the neglect of the executive branch of government. Financing has continually been inadequate to achieve positive developmental effects. Funding has been treated in a subjective and arbitrary manner, according to political or personal preferences. It is unacceptable for institutions to be funded predominantly according to inherited rights, without any relationship to the evaluation of the organization, programmes and individuals. It is not acceptable for the student welfare schemes to be included in the block grant for research and development, since payments for student welfare are greater than the basic operational costs of all the faculties in this country.
Science and higher education must be funded more generously than in the past. All funding must be related to a well-developed and promptly applied system of evaluation of individuals, programmes and institutions. Financing by non-governmental subjects (foundations, companies, foreign investors) should be stimulated.
III. Size, structure and dynamics of research and development personnel
Katarina Prpić
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