EU Regional Policy: method and evaluation. Relations with Countries outside the EU EU Regional Policy: method and evaluation. Presentation for officials in South Africa 14 September 2011 Unit for Communication, Information and Relations with Third Countries Directorate-General for Regional Policy European Commission

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

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.

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.

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.

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

Why have a Cohesion Policy? (2) Leaving disparities in place would compromise 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 to function properly

The challenges: wide disparities GDP per head (EU=100) Inner London 334.2% (But it is not NUTS 2) Severozapaden 25% Overall

The challenges: social exclusion and poverty 28/03/2017 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 9 9

Competitiveness: GDP growth rates compared Population (millions) 1995-2005 % per annum 2000-2005 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

Geographical eligibility for Structural Funds support 2007-13 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 Index EU-25 = 100

How does it work? How does the Commission choose projects? 18/02/2004 EN 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 12 12

Fully decentralised management of funds 18/02/2004 EN 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) 13 13

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

Some lessons from the last 20 years (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)

Some lessons from the last 20 years (2) Importance of Conditionality: respect for competition and environmental rules, equality of opportunity, partnership and democracy (also financial sanctions) 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.

Some lessons from the last 20 years Good to combine grants with some form of flexible credit (recycles funds...) Monitoring and evaluation essential, requiring expertise and rigorous indicators Transparency, communication, exchange of experience MOST OF ALL Long term strategic vision of the objectives to be attained: sectorally (eg transport) and/or geographically

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

Impact of Cohesion Policy 2000 - 2006 Modelling Block Data Block Management and implementation systems Hermin Quest Transtools Data indicators ‘06 Major projects Geographic distrib. Impact of Cohesion Policy 2000 - 2006 Thematic Block Enterprise support Environment and Climate Change Transport Structural change and globalization Gender and Demography Rural Development Community Initiatives Interreg III & Urban Cohesion Fund Transport & environment

Observations for growth and regional disparities 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

Economic Cohesion 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

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

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.

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)

Transport WP5a 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.

Social and Territorial Cohesion WP5b 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 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

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

Particular case of Objective 2 WP4 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

Implications for future Objective 2 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?

Management and implementation WP11 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

Implications for Future Policy 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

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!

Athens Metro, Syntagma square Major contribution to reducing pollution

Holland: Phileas, gas, electric guided bus, Eindhoven

Micro-chip for latest GSMs, Denmark Innovation inspired projects

Some Examples of projects 18/02/2004 EN 18/02/2004 EN Some Examples of projects Clean water in Romania 38 38 38 38

Some Examples of projects 18/02/2004 EN 18/02/2004 EN Some Examples of projects Far away foods 39 39 39 39

Some Examples of projects

18/02/2004 EN 18/02/2004 EN Child care; Mullingar 42 42 42 42

18/02/2004 EN 18/02/2004 EN Puzzle 43 43 43 43

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 Evaluations reports published in April 2010 give a clear indication of the achievements of the policy. Capturing the impact and results of cohesion policy is critical to its ongoing success. Letting the public know what is achieved with the investment from the policy is key to its transparency and accountability. It also offers the opportunity to learn from good practice elsewhere, and to continuously improve projects and programmes. The task of safeguarding and developing competitiveness as a constant necessity in successful economies - no region in Europe can assume prosperity forever. It is important for regions to diversify their economic activities in order to sustain their success – regional policy strategic programming support this.

EU 2020 – new framework for growth 3 thematic priorities: smart, sustainable, inclusive growth 5 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 Evaluations reports published in April 2010 give a clear indication of the achievements of the policy. Capturing the impact and results of cohesion policy is critical to its ongoing success. Letting the public know what is achieved with the investment from the policy is key to its transparency and accountability. It also offers the opportunity to learn from good practice elsewhere, and to continuously improve projects and programmes. The task of safeguarding and developing competitiveness as a constant necessity in successful economies - no region in Europe can assume prosperity forever. It is important for regions to diversify their economic activities in order to sustain their success – regional policy strategic programming support this.

Cross-Border Regional Links Canada/US : . The Economy Trade level Trade growth Trade breadth Trade dependency Culture and Values Organizations Intergovernmental Single-purpose General-purpose Civil Cities BC AB West AB SK MB Prairies - Great Plains ON Great Lakes - Heartland East QC Quebec NB NS PE NL Atlantica Strong Significant Weak : :

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?

for Regional Governance? What does this mean for Regional Governance? Implications for Canada? Current federal instruments and institutional arrangements geared to uniformity and consistency However, “one size may not fit all” Coherence over consistency

Some lessons from the last 20 years (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)

Some lessons from the last 20 years (2) Importance of Conditionality: respect for competition and environmental rules, equality of opportunity, partnership and democracy (also financial sanctions) 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.

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

Concentration on the Lisbon Strategy Procedural aspects COHESION POLICY LISBON AGENDA Community Strategic Guidelines (1) Integrated Guidelines National Strategies (NSRFs - 27) National Reform Programmes National and regional programmes (455) Annual Progress Report

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 the EU-average) Trans-European Transport Networks (TENs) projects and environmental projects EUROPEAN REGIONAL DEVELOPMENT FUND (€196 billion) Eligibility at regional level Supports physical investment programmes

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

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

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.

Organised by objectives Financial concentration on poorest regions 18/02/2004 EN Organised by objectives Financial concentration on poorest 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% 57 57

18/02/2004 EN 18/02/2004 EN Why should contributing regions keep pouring money into the other regions? (PIGS, Club Med, The Garlic Belt, Mañana 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. 58 58 58 58