Importance of Research in Times of Crisis

In the past decade, the research budgets of the chemical-pharmaceutical industry in Germany increased by an average of around 5 % per year. Since 2020, this trend has stopped due to the Coronavirus pandemic and the war in Ukraine. While the Coronavirus pandemic has affected competitors around the world, the consequences of the war mainly affect Germany and Europe. Innovations are, therefore, all the more important to counter the economic constraints of the crisis years. Here, however, the German chemical industry association, VCI, sees a strong need for Germany to catch up.

China Boosts R&D Spending

While strong support for research, development, and innovation is of strategic importance to China, and the Chinese government wants to develop the country into a global technology leader in several important innovation fields and is, therefore, massively promoting research and development, most German companies take a negative view of the political framework conditions for research and innovation. In addition to the Coronavirus pandemic, supply chain problems, and the energy crisis, there are national problems such as a shortage of skilled workers and slow approval procedures for industrial plants and research projects that slow down the innovation process in Germany.

Meanwhile, China is the world’s largest research location for chemistry. The Chinese chemical and pharmaceutical industry comes second only to the U.S. chemical and pahrmaceutical industry in internal R&D expenditures. Japan and Germany take third and fourth place.

Innovation Secures Jobs and Prosperity

The share of internal R&D expenditures financed by the German government in projects of industry or with business participation was 10.2 % in 1995. In 2019, it was only 3.2 %, even though federal departmental budgets for research have increased overall. “It is worrisome that the government is increasingly withdrawing from R&D projects with industry participation,” Thomas Wessel, Chairman of the Research, Science and Education Committee at the VCI, said.

He explains that there are currently important capital-intensive and high-risk research projects that exceed the capabilities of individual companies. As an example, Wessel cited energy and hydrogen research or chemical recycling of plastic waste to make starting materials for new plastics. “If you let research go, you lose production and with it jobs and prosperity,” Wessel said.

More than two-thirds of research costs are borne by companies – less than one-third by the state. The chemical association is, therefore, calling for the state to become more involved so that 3.5 % of the gross domestic product is spent on research and development in the future.

Importance of Start-ups and Fast Approval Processes

Start-ups are important for implementing innovations. The VCI calls for more venture capital, better framework conditions, and more financial instruments with a long-term financing horizon so that innovations can be commercialized quickly.

Another national problem is the high demands of the approval processes in the EU and especially in Germany (Germany often exceeds EU law), the complexity of the laws, and the unnecessarily broad involvement of the public. This has made new future projects increasingly difficult and delayed them in recent years. Pilot and demonstration plants for research projects, for example, should be able to be approved with reduced public participation in the future.