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Relations with Countries

outside the EU

EU Regional Policy: method and evaluation.

Presentation for officials in South Africa14 September 2011

Unit for Communication, Information and Relations with Third Countries

Directorate-General for Regional Policy

European Commission

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What is Regional Policy?

• A) The way the EU helps poorer regions catch up (<75% average GDP)

• B) Help for economically damaged regions to restructure

• C) Part of Cohesion Policy which has €347 billion for 2007-2013, say €50 billion per year (including Social Fund, Cohesion Fund…)

• D) Not just a budget but a tried and tested method

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A Method based on what works (1)• Made to measure strategies: not imposed

upon but adapted to the specific characteristics and needs of the region in question.

• Multi level governance: a wide range of organisations involved at all levels of programme design and management. State and regional governments, economic and social partners, representatives of civil society.

• Local centres: a polycentric approach maximising the potential of small and medium settlements in local economic development.

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A method based on what works (2)• Stable financing and programming: long term

financial perspectives avoid the risk of rushing to make hand-outs simply to ensure expenditure

• Local economic development: most private sector jobs in Europe are in micro, small or medium sized enterprises. Targeting them lays the basis for future growth.

• Institutional support: strong formal institutions and informal systems to supply, renew and encourage retention of informed and expert personnel.

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A Method based on what works (3)• Cross border co-operation (cross frontier,

trans national, interregional): enhances the sense of ‘Europe’, fosters trust and can develop reconciliation.

• Ownership: communities are encouraged to feel that they have a genuine stake in projects if they are not imposed from the top down but derive from participative, multi-level authorities and involve a degree of co-financing.

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Why have a Cohesion Policy? (1)

It is in the Treaty of Rome, and all later versions: To promote economic social (and, as of November, territorial) cohesion by reducing:

• disparities in the level of development between the regions

• the backwardness of the least favoured regions or islands, including rural areas

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Why have a Cohesion Policy? (2)

Leaving disparities in place would compromise

a) the Single Market and b) Economic and Monetary Union (EMU)

Both need an adjustment mechanism. We have Lisbon Strategy for Growth and

Jobs

But it needs the Cohesion Policy tofunction properly

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The challenges: wide disparities

•Overall GDP per head

(EU=100)

• Inner London 334.2%

(But it is not NUTS 2)

• Severozapaden 25%

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The challenges:social exclusion and poverty

• Poverty has a regional dimension

• It is high in less developed regions, such as those in the southern and eastern regions

• It is also a problem within highly developed regions, such as London, Brussels and Vienna

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Competitiveness: GDP growth rates compared

Population(millions)

1995-2005 % per annum

2000-2005% per annum

US 299.8 3.3 2.5

Brazil 186.8 2.4 2.7

Russia 142.0 3.9 6.1

India 1134.4 6.2 6.7

China 1312.9 9.0 9.4

EU 491.9 2.3 1.7

11Index EU-25 = 100

Convergence objective

(Regions > 75% in EU-25)

Convergence objective

statistically affected regions

Regional Competitiveness and Employment Objective

Phasing-in regions, ‘naturally’ above 75%

Regional Competitiveness and Employment Objective

Geographical eligibility for Structural Funds support 2007-13

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How does it work? How does the Commission choose projects?(It doesn’t…)“Shared” responsibility between the European Commission and Member State authorities

Commission determines the priorities, negotiates and approves the strategies and operational programmes proposed by the Member States, and allocates resources

Member States are responsible for designing operational programmes, implementing them (decentralising where possible) and monitoring

Economic and social partners as well as civil society bodies (environment, equal opportunities, sport etc.) participate in design programming and management.

Commission is involved in programme monitoring, commits and pays out approved expenditure and verifies the control systems

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Fully decentralised management of funds

For each of the 458 operational programme, the Member State appoints:

A managing authority (a national, regional or local public authority or public/private body to oversee the operational programme, and a monitoring committee to run it);

A certification body (a national, regional or local public authority or body to certify the statement of expenditure and the payment applications before their transmission to the Commission);

An auditing body (a national, regional or local public authority or body for each operational programme to oversee the efficient running of the management and monitoring system)

Automatic decommitment (N+2 or N+ 3) If you don’t use it, you lose it (two or three years after project commitment)

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What has Cohesion Policy achieved?• Much higher growth where active than elsewhere• Improved connectivity, road (2000) and rail (4000km)• Significant involvement of enterprise and civil society• Major improvements in local administration• Cross border co-operation a motor for reconciliation in

the Balkans, Northern Ireland and elsewhere• Major re-orientation towards innovation and research

for 2007-13 (growth, jobs, Lisbon)• Significant improvements to the environment• More than a million jobs• Revolutionary move to flexible credit, recycling funds

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Some lessons from the last 20 years (1)

1) Needs an objective, non-political method for raising and allocating resources, based on impeccable statistics

2) Combining co-financing and partnership encourages ownership. All programmes bring in between 15 and 50% of cost from outside public or private sources: often more.

3) Vital to dissociate overall legal framework from individual project decisions (best devolved to managing authorities)

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Some lessons from the last 20 years (2)

4 Importance of Conditionality: respect for competition and environmental rules, equality of opportunity, partnership and democracy (also financial sanctions)

5 Crucial to have adequate formal and informal institutional capacities to manage programmes

6 Cross border co-operation is vital to promote understanding and exchange experience. Old enmities must be set aside.

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Some lessons from the last 20 years7 Good to combine grants with some form of

flexible credit (recycles funds...)8 Monitoring and evaluation essential, requiring

expertise and rigorous indicators9 Transparency, communication, exchange of

experience10 MOST OF ALLLong term strategic vision of the objectives to be

attained: sectorally (eg transport) and/or geographically

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The design of ex post evaluation 2000-2006

Question of the evaluation: • What has been achieved in terms of reducing

disparities (e.g. as GDP per capita)? and

• in specific policy fields?

Evaluation design:• Thematic approach - methods and evaluation teams

adapted to themes

• Evaluation effort has been substantially stepped up in scale and resources. Academic community involved.

→ Change in comparison to earlier work

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Impact of Cohesion Impact of Cohesion Policy Policy

2000 - 2006

Management and

implementation systems

Data BlockData Block• Data indicators ‘06• Major projects • Geographic distrib.

Modelling BlockModelling Block

• Hermin • Quest• Transtools

Thematic BlockThematic Block • Enterprise support• Environment and Climate Change• Transport

• Structural change and globalization

• Gender and Demography• Rural Development

Community InitiativesInterreg III & Urban

Cohesion Fund Transport & environment

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• Growth higher in Objective 1 regions in nearly all countries

• EU 25: regional disparities narrowed

• EU 15: narrowed in most EU15 countries (exception GR)

• EU 10: regional disparities widened (high growth capitals!)

• In Objective 1 in EU15, 2% growth in GDP pc, 1.4% in non-assisted regions

Observations for growth and regional disparities

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Not possible to judge success of policy by observation of statistics – other factors at work!

• Approach adopted:– Was scale of funding big enough to make a difference?– Was it targeted at relevant factors?– Do macroeconomic models indicate positive effect on growth?– Was growth performance better in assisted regions?– Is there concrete evidence of positive results?

• Answers to all questions positive:– Funding significant especially in Obj 1 regions

• 2-3% of total fixed investment in Obj 1 regions• +1% of GDP pa in GR and PT

– Targeted at drivers of growth identified by theory, e.g. Enterprise investment & Infrastructure

Economic Cohesion

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Cumulative net effect of cohesion policy on GDP (model: QUEST)Percentage difference in GDP in end year as result of policy.For approximate annual value divide by number of years.

All funds, Cohesion Fund included. Priority on Objective 1.

2000-09 2000-15

EU 25 0.7 2.4

EU 10 3.7 10.2

EU 15 0.5 1.9

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Enterprise Support WP 6a, b, c

• Member States report creation of over 1 million jobs by enterprise support.

Test of new evaluation methods in E. Germany:• Higher investment per worker -

€8,000 grant leads to €11,000 - €12,000 extra investment

Estimate by counterfactual methods and regression.

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Policy Questions…

• Should ERDF finance aid to large enterprises?

• Need for more evidence on effectiveness of support to enterprises

• What are the correct measures/indicators?• Jobs safeguarded (now generally regarded as

inappropriate – policies of the 1990s)• New jobs created (but are we always trying to

create jobs directly and immediately?)• Increased productivity (with longer term job

creation)

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TransportWP5a

• ERDF co-financed 13% of all new high speed rail lines & 24% of the extension of motorways

• ERDF co-financed 26% of 7,734 km of motorway completed in EU15 and upgrading of 3,000 km of railway lines

• TRANSTOOLS: failed attempt to model effect on GDP, environment. New model needed?

• Questions on high-speed railways, support for ports, roads in EU15. Insufficient attention for public transport, cross-border projects.

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• A third of ERDF in Objective 1 and 36% in Objective 2 was aimed at social objectives plus territorial balance rather than economic growth

• Mainly environmental infrastructure and ‘planning and rehabilitation’

– increase in households in deprived regions connected to supply of clean drinking water (+14 million inhabitants) or main drainage (+20 million inhabitants)

– renovation and regeneration of villages, inner city areas, old industrial sites, heritage sites

Social and Territorial CohesionWP5b

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Social and Territorial Cohesion (2)

• Improvement in quality of life + territorial balance, but no indicators to measure this

• Limited effect on growth but strengthened conditions for sustainable development by reducing social + territorial disparities

Policy conclusion• Achievements of Cohesion policy go beyond

economic growth: multiple objectives• Need to spell out clearer case for ERDF financing

and link to regional development

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URBAN II programme

• Relatively limited scale (70 programmes, average €10m)

• Method more important than outputs (perceived results)• Environmental, leisure, image improved.• Inclusive partnership approach: relation with other

programmes• BUT:3.2million m² of new green space, 10, 712m² new

water collectors, 264 security projects on fear of crime, 443 new childcare places, 964 cultural events,43,000 training places for business, 23 commercial centres and stores renewed, 5984 business support interventions

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• In Objective 2 regions, small scale of funding – under EUR 40 per head a year

• Contrasts with large scale and long-lasting problems in many regions targeted

• Objective 2 in many cases acted as a catalyst for development of a long-term strategy for restructuring

• Effectiveness reflected in growth performance – rate achieved at worst no lower than in regions with fewer problems

Particular case of Objective 2WP4

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• Vision and commitment of regional policy makers more important than specialisation pattern

• Objective 2 and regional strategies need to be aligned

• More exchange of experience across MS is needed

• Evidence needed – how funding used plus effects

• Competitiveness only objective?

Implications for future Objective 2

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• EU10 countries had only short time to implement programmes plus limited experience.

• Fears of absorption difficulties not realised.

• Delivery system had significant effects on effectiveness of policies + spill-overs into domestic policy areas

• But weaknesses:– main focus on processes + financial control, not

on results of programmes and effectiveness– evaluations not adequately supported by

indicators

Management and implementation WP11

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• Multiplicity of goals – social, environmental, economic– Needs to be recognised in design, implementation

and evaluation– Priority attached to different objectives should be

made clear when programmes determined – Indicators needed so as progress can be monitored

• Concentration of funding in each region– On limited number of policy areas and measures to

ensure critical mass – does not mean concentrating on one objective

– Policy measures cannot be specified a priori - should be in line with needs of region

– Whatever choice – needs to be justified in light of EU strategies

Implications for Future Policy

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A Summary

• Evaluation demonstrates contribution of ERDF to reduction of disparities.

• EU25 as a whole wins with cohesion policy.

• We have more knowledge about what policy has delivered in main policy fields (transport, environment, enterprise support).

• We can demonstrate that policy delivers more than growth: a better environment and social benefits.

• We know much better how to evaluate.

• We have many more questions to answer!

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Athens Metro, Syntagma square

Major contribution to reducing

pollution

Major contribution to reducing

pollution

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Holland: Phileas, gas, electric guided bus, Eindhoven

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Micro-chip for latest GSMs, Denmark

Innovation inspired projects

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Some Examples of projectsSome Examples of projects

Clean water in RomaniaClean water in Romania

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Some Examples of projectsSome Examples of projects

Far away foods

Far away foods

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Some Examples of projects

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Child care;

Mullingar

Child care;

Mullingar

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PuzzlePuzzle

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Future of regional policy: political context

• Lisbon Treaty

– Territorial cohesion

– Co-decision

• Europe 2020

– More thematic approach, more focused, more

coherent

– Structural reforms

• Reform of economic governance

– Budgetary/fiscal constraints and risks

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EU 2020 – new framework for growth

3 thematic priorities: smart, sustainable, inclusive growth5 EU headline targets – translated into national ones• Employment rate, R&D investment, climate change, renewable

energy and energy efficiency, education and social inclusion/poverty

7 flagship initiatives – EU & national action• Innovation Union, Youth on the Move, Agenda for New Skills and

Jobs, Platform against poverty, Industrial Policy, Resource efficient Europe, Digital Agenda

Mobilising existing EU instruments:• Single market • External dimension• Stability and Growth Pact (SGP)• EU and national budgets & new financing instruments

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.

The Economy

Trade levelTrade growthTrade breadthTrade dependency

Culture and Values

Organizations

IntergovernmentalSingle-purposeGeneral-purpose

CivilCities

Strong

Significant

Weak

East

NB NS PE NL

Atlantica

QC

Quebec

ON

Great Lakes -

Heartland

AB SK MB

Prairies -Great Plains

BC AB

West

Cross-Border Regional Links Canada/US

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What does this mean?

• Regional growth and prosperity increasingly connected to regional cross-border dynamics

• Key questions at the regional-level:

– Are regional industries that are integrated across borders more vulnerable or more resilient to global events?

– Because of the global crisis, will regional cross-border value chains and arrangements be reshaped?

– How?

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• Current federal instruments and institutional arrangements geared to uniformity and consistency

• However, “one size may not fit all”

• Coherence over consistency

• Implications for Canada?

What does this meanfor Regional Governance?

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Some lessons from the last 20 years (1)

1) Needs an objective, non-political method for raising and allocating resources. Exclusive or inclusive approach to beneficiaries? (EU now inclusive)

2) Combining co-financing and partnership encourages ownership. All programmes bring in between 15 and 50% or more of cost from outside public or private sources: often more.

3) Vital to dissociate overall legal framework from individual project decisions (best devolved to managing authorities)

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Some lessons from the last 20 years (2)

4 Importance of Conditionality: respect for competition and environmental rules, equality of opportunity, partnership and democracy (also financial sanctions)

5 Crucial to have adequate formal and informal institutional capacities to manage programmes

6 Cross border co-operation is vital to promote understanding and exchange experience. Old enmities must be set aside.

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Concentration on the Lisbon Strategy

What is the Lisbon Strategy ?Originally adopted March 2000, updated 2001 and

2005

Aims to make Europe the most competitive and dynamic economy in the world…

The 2005 update created the ‘growth and jobs agenda’; two

quantitative targets: – Employment rate of 70% by 2010– R&D 3% of GDP by 2010

Since 2005, reinforced governance: – Detailed annual reporting– Peer pressure

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Community Strategic Guidelines

(1)

Integrated Guidelines

National Strategies (NSRFs - 27)

National Reform Programmes

National and regional

programmes (455)

Annual Progress Report

COHESION POLICY LISBON AGENDA

Concentration on the Lisbon Strategy

Procedural aspects

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Financial Instruments for Cohesion Policy 2007-13 (1)

COHESION FUND (€70 billion)• Eligibility at national level (Member States

with a Gross National Income per head of less than 90% of theEU-average)

• Trans-European Transport Networks (TENs) projects and environmental projects

EUROPEAN REGIONAL DEVELOPMENT FUND

(€196 billion) • Eligibility at regional level • Supports physical investment programmes

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Financial Instruments for Cohesion Policy 2007-13 (2)

EUROPEAN SOCIAL FUND (€76 billion)• Supports national programmes and human

capital investment programmes

INSTRUMENT FOR PRE-ACCESSION ASSISTANCE (€5 billion) • Regional development projects and

capacity building in the fields of transport, environment and economic development

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Concepts

• Redistribution• Restructuring• Investment not subsidies• Subsidiarity not top down (generally)• Wide partnership• Geographical balance/catching

up/’reducing disparities’• Regions: sub national, self governing

‘NUTS’ 2

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What is new (for 2007-2013)?

• Re-orientation: away from concentrating on weak spots towards building up potential all areas

• Innovation, research, ICT, knowledge society (Lisbon strategy)

• Revolutionary: flexible credit/micro credit- recycling the funds available.

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Organised by objectivesOrganised by objectivesFinancial concentration on Financial concentration on poorest regionspoorest regions

• Convergence (like old Obj 1: greater scope) 81.9%

• Competitiveness (old Obj 2&3, tie to Lisbon) 15.7%

• Territorial co-operation (former INTERREG programme and RFEC networks to test ideas) 2.4%

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Why should contributing regions Why should contributing regions keep pouring money into the keep pouring money into the

other regions? (PIGS, Club Med, other regions? (PIGS, Club Med, The Garlic Belt, Mañana The Garlic Belt, Mañana

republics…) republics…) • We are not pouring we are investing. For

all investments there are returns• As poorer regions catch up they buy more

goods• Many building and supply contracts come

back to contributing regions (35% PO, 42% HE)

• Solidarity is vital, especially now.