4.1 Modalities and Channels of Financing

The main elements involved are briefly described below:

Sources/Modalities include :

• funds from government agencies

• funds from public or private production enterprises and trading firms

• foreign funds

- foreign governments

- transnational corporations

- multilateral agencies

• loans

- commercial banks

- venture-capital companies

• private savings, through equity participation

• research grants/research contracts

• royalty payments/profit - risk sharing

• funds of research and higher educational institutions

• subsidies/duty draw backs-premiums/bonuses

Channels include :

• the treasury, which operates by means of the general state budget and other accounts such as appended budgets and extra-budgetary accounts

• promotional and special funds

- large private foundations

- national research councils and funds

- sectoral research councils and funds

- special funds, either government-controlled or autonomous (generally derived from a turnover tax on industry)

• banks and other national financial institutions

• companies for the investment of venture capital

• organizations and programmes of different institutions

Methods of securing financial resources

Economic surpluses are mobilized by the above-mentioned intermediary bodies, using the following different means :

• tax and duties for general purposes, paid into the treasury

• taxes and duties for specific purposes, paid into promotional or special funds, which may be levied on

- the turnover or net profits of the enterprises

 - loans

- exports of certain products

- imports of certain products

- royalties

- charges on public services

• bank deposits

• donations

Methods of allocating financial resources

The financial resources drawn by the intermediate bodies are allocated to users through different methods of financing, such as:

• budget appropriations

• non-lapsable budgets

• contracts for supply of goods or services

• loans granted by banks/international organizations

- shared risk loans (venture capital)

- bonus or promotional loans or soft terms loans

• investment through venture-capital/joint ventures/equity participation

• donations for works of public interest

Incentives

The governments can allow the companies promoting the S&T activities and the utilization/reliance on indigenous research efforts, through:

• tax deductions, granted for instance to an enterprise committing a certain amount on R&D expenditure

• total or partial exemption from customs duty for imported scientific equipment

• joint public/private financing, in which the state’s contribution is dependent on a corresponding contribution from the private sector, for example 50% of the cost of the R&D project

• the underwriting by the state-financed institutions of bank loans in cases in which the borrower can offer no real guarantee.