Regional Development in Ukraine - best practice

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Regional DevelopmentA best practice from The Netherlands

Jacques BazenLecturer Entrepreneurship / International Economic Relations

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Overview of the presentation

I. Example of regional development in The Netherlands: Case study Region Twente

II. Regional development in Ukraine: conditions

III.Discussion

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I. Regional development in The Netherlands:

Case study of the Region Twente

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Region Twente

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Region Twente

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Regional development: Focus on Enschede

The story of the making of a regional innovation hub:

From a mono-industrial city to a diversified innovation driven economy.

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Location of Enschede

Enschede

Number of inhabitants:

Enschede: 158 004Network city: 365 414Twente region: 625 840

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Enschede today

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How it began

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Enschede as emerging textile center

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Enschede as example of a boom-town

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Largest factory

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Disappearance of the textile industry

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How was the economy diversified?

• Long term approach of the government, no quick fix

• Strong investment in education & high tech

• Took several decades to reform the economy

Three ingredients for Enschede

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1. Investment in education

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Education was not enough…Alumni migration of the University Twente

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Stopping the brain drain

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2. Entrepreneurial universityManagement policy:Supporting entrepreneurshipamong students and staff

Rector Van den Kroonenberg

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High Tech campus development

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•Twente region is cooperating with the region Osnabrück and Münster for a long time.•The regions created a new cooperation platform called EURegio in 1958. The first of its kind.•Now, almost 100 Euroregions

Alfred Mozer

3. International cooperation

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• – Positive correlation between innovation and internationalisation in enterprises

• – New enterprises that export are an important factor for regional economic growth

• – International start-ups are more ambitious than non international start-ups

• – Positive correlation between internationalisation and succesful entrepreneurs

Research into International cooperation

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• – Attention for internationalisation: support international institutions like WTC and internationalisation of the Chamber of Commerce

• – Support cooperation in international clusters

• – More attention for the link between internationalisation and entrepreneurship

• – Open the networks of government and higher education for SMEs

Implications for regional policy

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• Nano netwerk Twente – Münster

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Enschede today

1960 1970 1980 1990 2000 2005 2010 20120

2

4

6

8

10

12

14

16

18

20

Population growth Enschede, Twente and The Netherlands

Nederland Region TwenteEnschede

per

10

00

2009 2010 2011 2012 2013-4

-3

-2

-1

0

1

2

3

4

Growth of number of jobs in NL, Twente and Enschede (in %)

The Netherlands Region TwenteEnschede

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II. Regional development in Ukraine

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Regional policy in Ukraine

Would the Enschede approach work for smaller cities in Ukraine?

These three ingredients are no rocket science…Shouldn’t be too difficult in itself, just takes time.

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Prerequisites

However, for real and long term sustainable development, there are some conditions:

Most important: Stable and fair political system and institutions that provide opportunities for everyone, regardless of their social background.

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Institutional theoryTo illustrate this I would like to speak about the idea of Extractive and Inclusive institutions.

Theory of Acemoglu & Robinson, Why nations fail, 2012

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Inclusive versus Extractive institutions

Inclusive countries: Extractive countries:- Rule of law - Rule of elite- Equality for all: - Some are more equal

Solid property rights than others- Aimed at effectiveness - Aimed at interests of

and efficiency the ruling class- Encouragement of - Encouragement of

clientelism:Entrepreneurship: incentive to be government Incentive to invest official or politician.

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1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

-50

-40

-30

-20

-10

0

10

20

Economic growth (%) of four countries (Worldbank)

GEO NLD RUS UKR

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5

-3

-1

1

3

5

7

9

11

13

Economic growth (%) in three post-Soviet countries

Georgia Russian Federation Ukraine

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Explanation: The difference

Kolomoyski, Pinchuk, Akhmetov

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Regional development in Ukraine

Real reforms are needed before real development:- Building of a meritocracy based on the Rule of

Law, not on the Rule of Money: Building a non-clientalistic state

- Fighting monopolies that block competition and new entries to the market

- Giving people real incentives to innovate: Solid property rights and intellectual property protection.

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Hans Holbein – Basel town hall, king Rehoboam

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III. Questions & Discussion