{"id":32063,"title":"Cohesion Policy\u2019s Blind Spot: Strong Regional Institutions are Crucial to Implementing Effective Growth Strategies on the Ground","link":"https:\/\/bst-europe.eu\/de\/investment-budget\/cohesion-policys-blind-spot-strong-regional-institutions-are-crucial-to-implementing-effective-growth-strategies-on-the-ground\/","date":"2. Februar 2023","date_unix":1675348486,"date_modified_unix":1748338351,"date_iso":"2023-02-02T14:34:46+00:00","content":"

Reforms underway<\/strong><\/h2>\n

With this week\u2019s announcement of the high-level group of specialists on the EU\u2019s cohesion policy<\/a>, wheels have finally been set in motion for the next round of reforms and refinements to what is arguably one of the world\u2019s largest development programmes.<\/p>\n

The European Structural and Investment Funds (ESIF) make up over 40% of the EU\u2019s budget, with the largest share dedicated to supporting Europe\u2019s regions individually and to achieving higher levels of cohesion across the continent. These policies are moving towards a mid-term review in the course of 2024.<\/p>\n

Discussions on how best to deliver such gigantic levels of funding in support of these two aims will focus, unsurprisingly, on working out what the key drivers for regional development and cohesion might be, with a view to pulling the right levers at the right time and in the right place.<\/p>\n

Beyond the overriding matter of how much of the EU\u2019s budget should be invested in different types of regions (a figure that has been rising steadily since the term \u201ccohesion\u201d entered the EU Treaties in 1987), the core of these discussions concerns the precise direction and priorities of regional growth strategies on the ground.<\/p>\n

Theory and practice<\/strong><\/h2>\n

On the back of long-standing and well-accepted economic growth theory, this means striking the correct balance between building physical infrastructure (such as motorways and energy supply), investing in human resources (such as developing education and skills) and improving the capacity for innovation on the part of individuals and firms.<\/p>\n

These three factors have traditionally accounted for most of the EU\u2019s cohesion investments and will, without a doubt, continue to do so. \u00a0Yet as almost every practitioner will confirm, the final leg in the marathon towards sustainable regional development remains real-world implementation on the ground.<\/p>\n

Making appropriate and well-designed strategies work in the real world remains the final success factor in the pursuit of the bigger prize, namely that of regions fulfilling their potential and growing together across the continent.<\/p>\n

Such implementation, in turn, requires highly functioning public governance structures. Yet our understanding of the \u201cinstitutions factor\u201d when it comes to the effective deployment of public investment appears to lag behind our understanding of the factors named above.<\/p>\n

Managing public investments<\/strong><\/h2>\n

Knowledge certainly abounds on the importance of good management of public investments, and specifically its links to productivity. Applying this knowledge is highly significant, with the OECD pointing out<\/a> that ESIF has funded the equivalent of 8.5% of government capital investment in the EU and up to 80% in individual member states.<\/p>\n

Alarmingly, however, the IMF\u2019s Public Investment Index suggests that 30% of the potential gains from public investment are lost due to inefficiencies<\/a> in public investment processes.\u00a0And academic research<\/a> points out that government deficiencies can lead to the development of strategies that are „good looking, but without substance,\u201d at worst benefiting clientelism rather than those who are supposed to stand to gain.<\/p>\n

The OECD Council in 2014 adopted the\u00a0Recommendation on Effective Public Investment across Levels of Government<\/em><\/a>, <\/em>setting out an impressive array of principles and recommendations. With reference to ESIF, the OECD points out the importance of equipping public servants with\u201d the right tools, skills and systems to develop and manage complex projects.\u201d<\/p>\n

It also points to the specific requirements of \u201cmulti-level governance systems that support public investment\u201d since EU funding in support of cohesion is carried out as a shared responsibility among national, regional, local, and European levels of government.<\/p>\n

Put simply, while ESIF offers remarkable investment opportunities, managing these funds represents something of a challenge and requires highly effective administrative capacity to even come close to being fully realized.<\/p>\n

The institutions factor<\/strong><\/h2>\n

Yet, while this insight is neither controversial nor new, leading experts on EU cohesion efforts point to the \u201cinstitutions factor\u201d as a decided blind spot when it comes to regional development policies in Europe, with real-world implications across the continent.<\/p>\n

The LSE\u2019s Andr\u00e9s Rodr\u00edguez-Pose, notably, argues<\/a> that attempts to understand the widely diverging trajectories of regions which, on the face of things, appear quite similar may have channelled attention to factors beyond those posited by economic growth theory \u2013 namely institutions. But despite the fact that scholarly interest has grown, it is \u201clabouring to go beyond the idea that \u2018institutions matter.\u2019\u201d<\/p>\n

This is a problem since, for Rodr\u00edguez-Pose, \u201cdifferences in institutional quality across territories can be considered today as important as\u2014if not more important than\u2014variations in physical and human capital endowments and innovation capacity for the economic development of cities and regions.\u201d Understanding the impact of these differences, in turn, could \u201cprovide the basis for a sounder and more efficient development policy at the subnational level.\u201d<\/p>\n

More concrete avenues of future research listed in this context concern the monopoly power of bureaucrats, new incentives in the pay structure of public administrations, the role of e-government for more efficiency and transparency, or measures aimed at increasing the education levels of civil servants. An overarching theme, clearly, is understanding \u201cwhat determines the emergence of able and effective local leaders\u201d \u2013 a nod to the aspect of informal rather than formal institutions, such as values, trust, creativity and diversity.<\/p>\n

Capacity-building and Technical Assistance<\/strong><\/h2>\n

Such thinking has certainly begun to find its way into the EU\u2019s cohesion policy. The cohesion-related funds of ESIF have seen a portion of their budget devoted to strengthening regional governance structures by means of administrative capacity-building, that is, \u201cdeveloping skills, experience, technical, management and strategic capacity within an organisation.\u201d\u00a0 These aims are being tackled through what is termed Technical Assistance (TA).<\/p>\n

A study carried out by the European Policy Research Centre (EPRC)<\/a> for the funding period of 2014-20 shows that at only 3.1% \u201cTA funding accounts for a relatively small share of ESIF (ERDF, ESF, CF) across the EU 28\u201d and is \u201cpredominantly allocated to management interventions, representing over 80% of TA funding\u201d. It also points out that \u201cmost TA funding is allocated to Human Resources (65%), mostly in intermediate bodies and managing authorities\u201d.<\/p>\n

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