The structure of the presentation

1. The Effects of EU Funding on Territorial CohesionWorkshop Evaluations on territorial development 25th April 2013 Gábor Balás, lead evaluator

2. The structure of the presentation • Aim of theevaluation • Territorialprocesses • The planning of territorialcohesion • Tools of implementation • Allocation of funds • The impacts of developmentfundsonterritorialcohesion • Lessons, recommendations

3. I. Aim of the evaluation Main questions: • How the Hungarian territorial processes have formed? • What was the role of cohesion funds in them? • What factors affected this impact? • How cohesion policy could better serve territorial cohesion? Approach: The exploration of processes and factors from the intentions through the implementation and realization to results.

4. II. Territorial processes • Detailed analysis • 2000-2011 (2000-2004, 2004-2007, 2007-2011) • Static state and dynamic processes for 26 indicators • Regional, county-level, micro-regional, municipal • Main processes to be explained: • The traditional gaps have not changed, but: • Growing gap (centre-peripheries!) • Remarkable internal realignments/changeovers on subregional levels, „convergence clubs” on regional level • Only temporary convergence due to the recession

5. II.1 Territorialprocesses - GDP and itschanges GDP/cap as the % of the country average, 2010 GDP per capita, 2010 GDP growth rate, yearly average, 2000-2010 Sigmadivegence of GDP, 2000-2010

6. II.2 Territorialprocesses – Employmentrate and itschanges Employment rate (age 15-74), 2011 Employment rate (age 15-74), 2011 Employment rate yearly average growth rate, 2000-2010 Hoover-index of employment rate, 2000-2010

7. II.3 Territorialprocesses – Migration Net migration yearly average per 1000 pop, 2000-2010

8. III. Territorial cohesion in planning Planning within an uncertain conception framework: • We have planned among varying European interpretations on territorial cohesion • NSRF: European convergence, internal levelling, territorial harmony and synergy in the developments • ROPs: regional convergence and internal levelling, usage of space • SOPs: general principles, levelling goals, implicit sectoral goals

9. IV. Tools of implementation

10. V.1 Patterns of fund allocation – Territorial distribution of the awarded funds • Scope of data analysis: • 2004-2012 period : NDP - CF/ISPA – NSRF – EAFRD • Comparability – problems in territorial identification • 15 small-regional case studies: settlement structures, development, east-west sections • NSRF funds: • more equated, yet • with different regional strategies • EAFRD should be considered after 2007

11. V.2 Patterns of fund allocation- Application activity and winning chances In the competition the local capacity (activity in applications) is the decisive factor

12. V.3 Patterns of fund allocation– Payments between 2007-12 Together with the EAFRD there is an equating effort, but- a grey zone of the developments appeared - does the fund make its impacts where it is received?

13. V.4 Allocation of funds - bottom view from the fields • It is not always the amount of money which results in contentedness • not the quantity matters, but the kind of the fund • the conception and the perception often differs: • in the east, where expectations were too much and • where the horizontal links were weak. • Succesful subregions have sufficient capacity to apply, and already better institutional capacities • Those who performed below average, there was no determinative actor • The popularity of the funds is due to their accessibility, how they match local demands and their administrative burden • The most popular are the former national funds –because conditions could be changed, the least popular is the LEADER because of its complicated administration

14. VI. The impact of development funds on territorial cohesion Goal: define the impacts also considering the spillovers and their break-up by the type of funds Spatial econometric analysis with strong assumptions. Focus: the impacts of spending until 2010 on the level of smallregions, to development inequalities with three variables (income, employment, migration) Analysis in four steps: Build a basic model Integrate funding variables in it, question: which territorial unit’s variables were impacted by the funds Robustness analysis – which funds are effective for certain at last: has it increased or decreased cohesion About the limitations of the interpretation Because of the problems of control groups and data we only interpret the very robust results our results end where they become the most interesting (2010!)

15. VI.1 Impacts on territorial cohesion- Income (municipal economic power) - 1

16. VI.2 Impacts on territorial cohesion- Income (municipal economic power) - 2 The effects are only significant locally

17. VI.3 Impacts on territorial cohesion- Income (municipal economic power) - 3 Development funds decrease the income inequalities

18. VI.4 Impacts on territorial cohesion – Income (municipal economic power ) - 4 Change in income due to the funds (MEP) change 2004-2010, million HUF per capita Subregions with lower income received more CHR, Balaton, Nógrád received less BP is above average, but its natural dynamic growth is even more

19. VI.5 Impacts on territorial cohesion– employment • Spillover effects occured spatially and in time: • The employability and the R+D funds increase employment in the negihbourhood (with 2 or 1 year delay) • The communal infrastructure for enterprises corrects locally within 2 years • The funds for enterprises and the communal infrastructure developments worsen them with a 2 year delay, but in the neighbouring regions: - It improved cohesion except in 2007 and 2008

20. VI.6 Impacts on territorial cohesion– migration • Impacts are local, yet very heterogenous (in two directions) • Funds for enterprises: • usually worsen them, but funds for turism improve them (EDOP overweight) • Heterogenous by ageing and unemployment • Improving employability: • on average, migration has positive impacts, but • impacts are heterogenous by job supply and unemployment(-2,15-3,96) • Training of actives: • on average it improves (3,06), but • by unemployment it is heterogenous (-2,48 – 7,00) • The effects on cohesion vary: • In the south and in Nógrád county it had a positive effect • In the east it had negative effects

21. VI.7 Impacts on territorial cohesion – The spillover effects of CHR developments • Experimental model for TGE • With assymetric adjacency matrix (gravity model) – Budapest is adjacent to every regionone • Matching of the model improved slightly • Results for further consideration: • Most of the effects come from the CHR, but these effects make an impact in the CHR • The effects occuring in small-regions outside CHR come from CHR, therefore • Funds allocated to CHR are important to every micro-region, but they increase inequality.

22. VI.8 Impacts on territorial cohesion– Case studies - 1 • Funds considered as the most important for development: • Increasing touristic appeal, developments in education, city center developments (and subregion specific developments) • Funds considered insufficient or missing in areas of: • job creation, development of enterprises • development funding: intermittent or failed to implement • local infrastructural developments • Developments considered successful: • where the developments have been built on each other • if a project was realized in a cooperation • The successful small-regions had • sufficient capacity for development • their institutional system rather improved due to the developments • they have felt their development planned • they held their good institutional system as the reason of success • There was no agreement between the actors on the unsuccessful ones

23. VI.9 Impacts on territorial cohesion – Case studies - 2 • Unsuccessful small-regions: complained of the complete lack of internal coordination (both vertically and horizontally) • In the small-regions unsuccessful in developments: • The internal inequalities stagnated • Lack of a definitive institutional actor in development • The vertical coordination of the development was weak • The funds have not restructured the internal balance of power • Factors of succes: small-regional differences • in larger cities: the capacities of the cities • in mid-size towns: the deal of the competing actors • in small towns and villages: success is due to the existence of an institutional actor who coordinates the development (development center) • The development policy increased the capacities of the LAMR33, in other LAMRs the institutional capacities retrograded

24. VII.1 Lessons learned – The impacts can be increased with synergies This large sum of money has its impacts, yet it would be possible to improve it by synergies BUT • …currently the demand for coordination is too large due to the: • the limitations • the schedule of the funds, and • The coordination is unsuccessful • in the management of funds • between the goals of sectors and the demand of locals • between the local actors • Because: • Cooperation is not the nature of the Hungarian culture • locally due to the lack of competition and predictability • in the center due to the division of responsibilities • between levels due to the incorrectly applied techniques

25. VII.2 Lessons learned – One solution is a strong player A stronginstitutionalactor is a possible, yetfragilesolution: • They had successwheretheactorwhichembracethewholesub-regionwere • incase of large and mid-sizecitiesthecentral city • thesub-regionalworkinstitutionor a largeenterpriseelsewhere • Alsothecallsforapplicationscouldonlybuildoneachotherattheseplaces • there is also almost no exampleforverticalcoordination, thiscannot be obliged • Project ownersare building furthertheirpreviousdevelopments, yettheapplicationsbasedonstartegiesaremuch more rare • If more thanoneactorsdevelopmentsshould be synchronized, it is onlypossibleifyouhave a strongactor • However: the developments with one actor became more vulnerable (e.g. Pécs)

26. VII.3 Lessons learned–Can cooperations be established? • The possibilityforcooperationsdevelopedtheinstitutionalsystem (LAMR), yettheobligationforcooperationshavenotfacilitatedit (obligatoryconsortiums) • The institutionsformedindevelopment policy • eitherintegratedintothe local instituitons • orwill be deceasedaftertheprojects • The cooperationsformedinthe NDP has retrograded, exceptforthe LAR programme • Inthe NSRF thoseprojectsintegratedthesub-regions, whichwerecarried out by an intitutionwhichalready had an integratedgoal • therewerenot a lot of these • theactorscompetedwitheachothers more times, thanatthenumber of timestheycouldwintogether • Iftherewereincentives, jointlyobtainablefund, thentherewerecooperation • The planningnotencouragedcooperation, yetitwas a goodindicator of local cooperation Therefore: Cooperationscan be establishedbyjointinterests, notbyforceonly

27. VIII.1. Recommendations to increase synergy • Weshoulddecreasenecessitiesforcooperation • Weshouldstrengthenthecapacitieswhichareabletocoordinate • Weshouldfacilitatethe local cooperationswitheconomicincentives • Starting points: • The territorialpublicadministrationbringsnew, strongactors • The systemsbuildonverticalcoordinationaresuccessfulontheirown, ifwedonotobstructthem • The horizontalcoordination is onlypossiblealonginterests • Concretesteps: • The support of capacity building forthe old and newactorswhomhave interest interritorialintegration; • Creation of sectorialproblemmaps, basedonwhichthepublicservicescould be financedon a per capitabasis (predictably)instead of competition

28. VIII.2. Recommendations to increase synergy • Support of newphasesofprojectswhichareconsidered to be successful; • Callsforsmallerprojects, and developmentconsultancyfortheinstitutionswithweakercapacities • Per capitabaseddevelopmentfundallocationin a 7 yearframeworkforthenon-compulsorymunicipalpublicservices • Development of strongterritorialinstitutionsystemindevelopment policy onthebasis of alreadyexistingcapacitieswith a county-levelcoordinationadjustedforthenewterritorialpublicadministrationsystem • Increasingtheinteroperability of thefunds • Directstatecoordinateddevelopmentinspecialcases • Greaterfundingintensityfortheprojectsrealizedincooperations • in a limited allocationinstitutionalcallsforapplications to encourageinnovationincooperation

29. Thank you for your attention! balasgabor@hetfa.hu