Research, development and innovation ("RDI") investment is key to renewing economic growth, strengthening competitiveness and boosting employment. Article 157 of the EU Treaty outlines the Community objective of strengthening the scientific and technological basis of EU industries and encouraging them to become more competitive internationally. This objective has been repeatedly emphasised and complemented with concrete recommendations by the European Council at its summits in Lisbon, Barcelona and, very recently, in Thessaloniki. RDI is of particular importance for a high tech industry such as shipbuilding. Although European shipbuilders are today already investing approximately 10% of their turnover in this field every year, additional efforts are required to meet this Community objective effectively.

　

 In this respect it is recognised that the European Community research framework programmes have increasingly supported RDI efforts of the European shipbuilding industry. This support provides particular benefits by bringing together a critical mass of European research to develop longer-term solutions which address issues concerning training, the environment, safety and competitiveness and take into account the wider commercial, environmental and regulatory perspectives. The "InterSHIP" project, being the largest integrated project supported by the Community Framework Programme under the surface transport heading, can serve as a good example. Based on the encouraging experiences made within the Maritime Industry Forum framework and growing technological requirements, the continued focus on a long term strategic vision for shipbuilding related RDI is essential. This vision must be commensurate with the long operational life cycle of ships and should encourage the sustained active participation of all maritime stakeholders in order to address all issues (industrial, regulatory, operational etc.) within the wider shipbuilding RDI environment. Such a vision can be used to direct policy development, to allocate resources efficiently and to ensure the maximum long term benefit for the European shipbuilding industry.

　

 However, a fundamental obstacle to improved RDI investment still results from the application of the current Community Regulation. The Community framework for state aid for research and development has been effective to ensure EU competition rules, but, due to certain sector characteristics, the shipbuilding industry has not been able to receive adequate aid on this basis. Therefore new ways and means are needed in order to accommodate the RDI interests and needs of the sector while ensuring full compliance with the principles of the internal market. The Community already recognised this problem in 1998 when a new instrument was introduced, aiming to provide investment aid for innovations. However, this provision faced practical difficulties in implementation and has in fact never been applied.

　

 Possible solutions could derive from the fact that in the shipbuilding business a significant part of the innovation activities is integrated in the design and production process itself, while in many other industries RDI activities are carried out before series production starts.

　

 New ships are large sophisticated products, typically launched as one-of-a-kind or in very short series. Shipbuilders and suppliers have to perform RDI activities prior to a specific order to define innovative systems and components. At the same time, clients are requesting a ship tailor-made to their specific business concepts. The adoption of specific innovative solutions during the concept design phase establishes crucial competitive advantages and is the only way for European Shipbuilders to be successful when competing with Far East Shipbuilders who offer "off the shelf solutions.

　

 Ships are sold on the basis of the concept design, which is far from representing a complete product definition. Consequently, the largest part of the product development and of the innovation activities is carried out after the signature of the sales contract. In fact, only after concluding the contract is the yard in a position to clarify the specific RDI needs emerging during the concept design phase. These activities have to be performed in the shortest possible time with the lowest possible costs.

　

 This process implies a very significant industrial and technological risk for the shipyard. The bulk of RDI activities in shipbuilding are always an integrated part of developing, designing and building prototype ships, that are, without exception, used commercially later on.

　

 The market for complex ships, on which European yards concentrate, is in particular characterised by limited demand in numbers of ships, the building of prototypes with very few sister ships, a tailored and knowledge-based production process, a considerable technical expenditure, and a high number of specialised subcontractors. In complex ships up to 70-80% of their value and of the relevant innovations is developed and implemented by the shipyards together with the suppliers inside a wide network of players operating via concurrent engineering.

　

 These operating conditions are puffing a significant economic and financial burden on the EU shipbuilding industry. An increasing number of European shipbuilders operate in and depend on high-tech market niches, requiring continuously growing investments in RDI in order to maintain the leadership position held today.

　

 Under the current regulatory conditions, RDI support schemes have been used to a very limited extent only. The specifics of the shipbuilding industry with regard to concept, functional and detail design activities are not reflected in the applicable regulation. The subject of any shipbuilding contract is the ship but not the knowledge in research, development and innovation that is undoubtedly required to construct the ship. Consequently, shipbuilding specific RDI activities, also concerning design, tests and trials of new classes of vessels, need to be adequately recognised in practical terms in any support regime, including appropriate shipbuilding specific concepts and the particular non-recurring costs stemming from them. This could be best done under the provisions of innovation aid.

　

 Considering that in any other industry the development of new products, including prototypes, is usually considered a pre-competitive development activity, allowed to be supported by up to 25%, it needs to be ensured that shipbuilding enjoys, in substance, the same conditions as other industries. While maintaining the basic concepts of the current regulatory framework and without prejudice to the competition in the internal market, the specifics of the shipbuilding industry should not be an obstacle to the application of aid intensities as used in other sectors with comparable activities. This may require clarifying the eligible expenditures including prototyping costs, and providing an incentive for the adoption of innovative technical solutions across the European shipbuilding and marine equipment industry.

　

 This would yield positive effects for maintaining and improving the technological leadership of European shipbuilders and would help to secure their strong position in markets for complex high-tech vessels. European shipyards would thus increase their investments in engineering know how and the development of new ships, providing new commercial opportunities. The barriers that currently hamper the full application of RDI support schemes would vanish. Improved RDI support schemes would enable the European shipbuilding industry to move to an even higher technological level, selling more ambitious ideas and realising them according to the contractual obligations. Taking on the technical risk of new development and innovation activities would become possible, and at the same time, the client's requirements for innovative solutions could be fulfilled in an economically viable manner. Consequently, the aim of Article 157, to enhance the competitiveness of the European economy by fostering exploitation of research, innovation and technological development, could be more appropriately pursued in the shipbuilding sector.

　

 The absence of an adequate regulatory framework that can be applied effectively could result in European shipbuilders having less and less means to offer highly developed technological solutions. Consequently, the development of new types of ships would no longer be cost efficient. Given the risk connected with RDI activities in general and the increasing unwillingness of financial institutions to finance innovative projects, shipyards might not be able to correspond to ever-higher demands coming from their customers. In combination with the already meagre profits, revenues could decrease further and there is a serious danger that EU shipbuilding technologies could be caught in a downward spiral if no appropriate measures to foster RDI investment are taken.