EU Regional Policy: method and evaluation.

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

2. 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

3. 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.

4. 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.

5. 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.

6. 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

7. 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

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

9. 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

10. Competitiveness: GDP growth rates compared

11. 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

12. 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

13. 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

14. 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

15. 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)

16. 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.

17. 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

18. 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

19. Management and implementation systems 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 Modelling Block Data Block Impact of Cohesion Policy 2000 - 2006 • Hermin • Quest • Transtools • Data indicators ‘06 • Major projects • Geographic distrib.

20. 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

21. 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

22. 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.

24. Enterprise SupportWP 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.

25. 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)

26. 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.

27. 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

28. 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

29. 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

30. 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

31. 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?

32. 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

33. 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

34. 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!

35. Athens Metro, Syntagma square Major contribution to reducing pollution

36. Holland: Phileas, gas, electric guided bus, Eindhoven

37. Micro-chip for latest GSMs, Denmark Innovation inspired projects

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

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

40. Some Examples of projects

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

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

44. 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

45. 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

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

47. 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? What does this mean? • Regional growth and prosperity increasingly connected to regional cross-border dynamics

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

49. 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)

50. 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.