Professor von Prondzynski: scale up innovation investment, starting in the North East

The Aberdeen city region deal, signed on 21 November 2016, can act as a springboard to developing innovation-intensive industry in the region at a scale not seen before in Scotland, according to Robert Gordon University principal Professor Ferdinand von Prondzynski.

Von Prondzynski, who took over as chair of local economic development programme Energetica in 2015, believes Scotland can emulate successes in Ireland and the United States by supporting strategic planning partnerships between industry, universities and government.

Energetica was developed in late 2007 as a partnership between Scottish Enterprise, Aberdeenshire Council and Aberdeen City Council, focusing on a 30-mile corridor location from Bridge of Don in Aberdeen, north to Peterhead and west around Aberdeen International Airport.

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Set up to capitalise on access to its locality to energy expertise and supply chains, the initiative aims to create a cluster of economic activity which is world class. This promotes the area as a leading destination for innovation, knowledge, learning and skills in current and future energy generation.

The city deal, said to be worth up to £826.2m over a ten-year period, will no doubt boost this ambition with significant investment from both the UK and Scottish governments as well as Aberdeen City and Aberdeenshire councils. 

Within the corridor, investment in digital and transport connectivity and other infrastructure, alongside a £20m investment in Aberdeen International Airport is already underway, and a new £333m exhibition and conference centre is planned by Aberdeen City Council. 

Energetica is taking the opportunity to realign its priorities to match those of the city deal, says von Prondzynski, including the four key sectors of energy, food and drink, life sciences and tourism, and it can play a key role in realising the ambition.

In his previous role as president of Dublin City University, von Prondzynski worked closely with the Irish agency IDA Ireland, which saw significant investment in research and development through a partnership between industry, universities and government. 

It was at a scale not yet seen in Scotland, he tells Holyrood.

“There clearly have been some smart moves by individual universities, but this sort of broad planning partnership to create a regional strategy for a high-value economy, that hasn’t really happened yet in Scotland, whereas it has kind of become the norm in Ireland.”

The Energetica model is one developed in the United States in the 1960s, exemplified initially by the North Carolina research triangle. 

“That partnership, between the state of North Carolina, the key universities in the state and industry, turned North Carolina from a rural backwater into a driver of the US economy,” says von Prondzynski.

“It became one of the most significant innovation-intensive areas in a number of industrial sectors, and also turned Charlotte into the second financial centre of the United States, so it was hugely effective in transforming the economy.”

Although there have been initiatives by individual universities or local authorities, Scotland has yet to do anything on a similar scale, he argues.

After moving to Scotland, von Prondzynski recognised similar ambition in the Energetica initiative, but says it hadn’t quite fulfilled its potential. 

“By the time I got to see it and started asking about it and so on, it became clear to me Energetica had become something of a planning vehicle, but I mean planning in the sense of planning laws and construction or zoning, but it hadn’t fulfilled its potential as a strategic economic development vehicle.”

After the previous chair, Professor Stephen Logan of the University of Aberdeen stepped down, von Prondzynski volunteered to chair the steering group to set out clear objectives and strategy, and to realise the potential of the Aberdeen city region deal. 

Part of this includes shifting a perception Energetica is focused solely on renewable energy, he says. In fact, the original idea was based on linking with the oil and gas industry.

“Energetica is an energy-based initiative, but not exclusively so. We’re looking at including within it some of the other areas the city region deal has highlighted, which includes life sciences and food and drink.”

Regeneration is also a factor in the Energetica initiative. One example is Peterhead, a town benefitting from recent investment of £500,000 in the town centre and a £49m upgrade to the port, as well as proposals for a simplified planning zone to incentivise investment in the locality. 

However, the scrapping of the £1bn carbon capture and storage initiative promised for the town by the UK Government, as well as volatility in the oil and gas market, shows how economic uncertainty can still cast a cloud over ambition.

But von Prondzynski points to the Irish example for how investment in R&D is future-proof. The Irish Government took some “very important, very wise decisions” during what was known as the Celtic tiger boom.

“Amongst those was to invest a significant amount of money in the development of R&D,” he says.

“This involved creating clusters of excellence in key areas in the universities. Rather than have excellence across the board – Ireland is too small a country for that, and Scotland would be the same – a certain number of focused areas were chosen where there would be major investment in universities, but in subject areas which would be of direct interest to industry. And this became the basis then for a significant number of investment decisions by industry.”

This represented a shift from an economy based on being a “low-value” manufacturing location to “high value” foreign investments, he says. 

“The impact of that was when Ireland went into recession, even at the worst year of the recession, which was 2012, Ireland drew in more R&D intensive foreign direct investment than the entire rest of the EU put together. Far more than Britain, for example.

“That was made possible by the decisions made a little earlier, and it is also the reason why Ireland has come out of the recession, and now Ireland has more than twice the GDP growth of Britain at the moment.”

Could Energetica, and Scotland as a whole, do something similar?

“Scotland must do something similar, because first of all, we have to diversify the economy, not just in the North East but generally,” says von Prondzynski.

While Scotland has excellent universities, it has “almost no” industry R&D, he says, with significant foreign investments in industries like life sciences and pharmaceuticals focused on “low-value level”.

“If we’re to sustain the Scottish economy, we really need to become much smarter at high-value investment.”

This includes specialising in certain areas of research, he argues. 

“Scotland’s universities are very impressive, with world-leading research across a large number of subjects. But in addition to maintaining  all-around excellence, we also need to consider whether certain areas need particular investment so that in these areas we can lead the world. That requires very focused investment.”

University leaders could also play a greater role as “key salespeople” on overseas investment missions by ministers and agencies, he adds, something he did in his role in Dublin. 

“Until now we’ve been used to universities being asked to provide services to support investment or other decisions, rather than being partners in strategising it,” he says. 

Von Prondzynski says he is optimistic there was a willingness to take on the issue, with strong support for Energetica from Scottish Enterprise.

“We need to get very smart at this type of thing, but it does require this partnership approach. You have to have the three stakeholders, which is industry, universities and government working as a partnership to make it succeed.”