Analysis of the impact of Community Policies on Regional Cohesion

Contract Number: 2002 CE 16 0 AT 171

)

FINAL REPORT

ANNEX I REGIONAL CASE STUDIES

Sociedad Limitada Laboral

( VOLUME 3

EUROPEAN COMMISSION DG Regional Policy

October, 2003

LABOUR ASOCIADOS

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INDEX

VOLUMEN III NL – NEDERLAND / NETHERLANDS 564 Flevoland 564

AT – ÖSTERREICH / AUSTRIA 606 Steiermark 606

PT – PORTUGAL 626 Algarve 626 Açores 642

FI – SUOMI / FINLAND 659 Itä-Suomi 659 Etelä-Suomi 705

SE – SVERIGE / SWEDEN 753 Norra Mellansverige and Övre Norrland 753

UK – UNITED KINGDOM 789 West Midlands 789 Highlands & Islands 809 Northern Ireland 832

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THE NETHERLANDS:

REGION: FLEVOLAND

ELABORATION:

Author: H. Katteler and M. Eppink

From: ITS. NIJMEGEN. THE NETHERLANDS

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF FLEVOLAND. THE NETHERLANDS

EXECUTIVE SUMMARY

Background of the study

This report analyses the impact of Community policies on cohesion in Flevoland. Flevoland is one of the regions in Europe that are receiving Community support as a so-called Objective 1 region given that the income per head was below the 75 percent level of the average for the member states of the European Union in 1993. The support of Flevoland as a less developed region started 1994 and will continue until 2006.

The region Flevoland (341.700 inhabitants) coincides with the province of Flevoland. The region consists of land that was reclaimed from the sea in the last century. Flevoland compensated for the housing needs in the surrounding overcrowded regions in large, new urban settlements and had a strong population growth. Residential areas were planned and realised, however, without a sufficient level of employment and social structure. Since a large part of the employees in Flevoland had a job outside the region in 1993, the region had a high negative commuting balance. The additional number of jobs to be created by the Objective 1 programme was estimated at roughly 10.000 jobs additional to the autonomous growth. The working population in Flevoland grew from 115.000 in 1995 to 158.000 in 2001. The education level in Flevoland stayed behind the national average and the region had low qualification levels of the unemployed. Flevoland had a low GDP rather than a high unemployment rate. Development problems were, among others, weaknesses in the productive environment, poor living environment in terms of urban facilities, weak intermediary organisations and over-representation of small and medium sized enterprises.

Community policies

The following European funds have a high relevancy to the development of Flevoland: ERDF, EAGGF, FIFG and ESF. The 1st programme period (1994-1999) brought in 150 million Euros Community resources. The 2nd programme period 2000-2006 has a Community contribution of 126 million Euros. Flevoland participates in communitarian initiatives such as Leader+, Interreg III and Equal.

The regional policy identified a clear set of policy priorities using the European resources. The 1st programme period had 8 priorities whereas the 2nd period has 4 priority areas. The priority areas in this current period are development of the urban area, development of the rural area, improvement of the production structure and social cohesion and labour market. The state played a substantial role in the 1st period but this role is less conspicuous in the 2nd period. The way the programmes

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Economic impact of the Community policies

Cohesion is assumed to increase when regional differences are actually mitigated. In the case of Flevoland Community expenditures correlate with decreased regional differences. Economic growth figures at the macro level indicate a relatively good performance of the Flevoland region.

The economic growth in Flevoland (gross added value against basic process) appeared to be substantially higher compared to all other Dutch regions in the period 1995-2001. The yearly growth in Flevoland was 6,0% whereas the average yearly growth in other regions was 2,9%.

Flevoland had still a 2,4% growth figure in the in the year 2002 when the economic growth severely decreased to 0,15% nationwide.

All in all, it seems plausible to infer that Community policies have substantially contributed to the economic growth figure that was realised. The objective to increase the GDP per capita up to 85% of the EU average was not reached yet (was: 75% in 1993; is 80% in 1999). The increase in employment opportunities was not sufficient to counteract the high population growth (in-migration) that is typical for Flevoland.

A total investment impulse of about 1,0 billion Euros was realised. This investment scale substantially exceeded the original aim of 0,5 billion Euro. Compared to the European support - in the order of magnitude of 0,15 billion Euros - a large multiplier effect of about 1 to 6 was realised.

Effects on social cohesion and quality of life

Community policies (CPs) have induced a number of relevant non-financial impacts. Generally, these effects have a positive impact on the quality of life. The following impacts could be observed.

Stimulating integrated regional policy development The CPs enabled the Flevoland authorities to develop a regional policy. Since the regional development of Flevoland was not a priority within national policies, the development of a regional policy did set a robust framework for the development of the region. This allowed taking initiatives and initiate projects more than could happen before. An additional substantial advantage of the Community support was that the CPs evoked an integrated approach. A further result is that the region will have a regional policy framework even without Community support after the year 2006.

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Social integration

The Community policies attracted many actors and organisations. The European programme worked out as a binding agent and strengthened societal structure by creating liaison between companies and organisations also resulting in a more robust infrastructure of intermediate organisations.

Mitigating weak points

Specific quality aspects of regional development that were identified as weak points prior to the start of the programme did not recur as such prior to the 2nd programme period. The following weak points were mitigated judging by a SWOT analysis made prior to both the 1st and the 2nd programme period: under- representation of large enterprises; low qualification level of the unemployed; underdeveloped higher education and knowledge infrastructure; high congestion on the transport infrastructure. Other weak points remained.

Programme effects, however, cannot always be identified, as they are invisible or not measurable. In case effects were measured indeed, these effects cannot necessarily be ascribed to the European programme. Such a situation is felt to exist particularly in the area of social cohesion and labour market.

Coordination of Community policies

The CPs in Flevoland are managed by the programme management (PME). PME has clear steering mechanisms and decision power. The PME is responsible for programme implementation. The integrated management structure that was chosen for the 2nd programme period enables the systematic management of regional development. The programme management is endorsed by the existing provincial organisation that operates at the same regional scale. The integrated management has enabled projects to come alive that would not have been realised without such management structure. Also an integrated way of communication towards actors in the field is an exponent of the integrated management structure.

Governance

The Community policies have brought about two essential features of governance:

CPs stimulated to work systematically according to plans;

CPs allowed working with a long-term perspective.

These features increased the quality of planning and the quality of regional development.

However, discrepancies caused delay or project failures. Discrepancies of the following types could be identified:

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The use of different sets of criteria by different public authorities.

The different appraisal of a criterion by different authorities;

The different time horizon of business and European procedures.

Incongruent scopes at different authority levels working out as obstacles to project realisation in practice.

A real risk is that the national authorities will not adopt the role of ‘Europe’ to enhance the regional development of Flevoland after 2006 when the Community support to Flevoland will end. This could severely threaten the future implementation of regional development policy.

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INDEX

1 INTRODUCTION

2 CONTEXT AND BACKGROUND 2.1 BASIC CHARACTERISTICS OF THE FLEVOLAND REGION 2.2 PROFILE OF THE REGION IN TERMS OF DEVELOPMENT AND COMPETITIVE FACTORS

3 COMMUNITY POLICIES IN FLEVOLAND 3.1 PRIORITY AREAS 3.2 RELEVANCE OF COMMUNITY POLICIES IN QUANTITATIVE TERMS

4 ASSESSMENT OF THE IMPACT OF THE COMMUNITY POLICIES RELATED TO THE SOCIAL AND ECONOMIC COHESION 4.1 REGIONAL DEVELOPMENT AND CONVERGENCE 4.2 NON-FINANCIAL IMPACTS OF CPS - QUALITY OF LIFE 4.3 COORDINATION AMONG THE SET OF COMMUNITY POLICIES 4.4 GOVERNANCE ISSUES

5 CONCLUSIONS

6 GUIDELINES FOR COMMUNITY ACTION

7 ANNEX II. STATISTICAL DATA

BIBLIOGRAPHY

APPENDIX

Index of tables included in ANNEX II

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Index of tables

Table 1: General characteristic data about the working population and employment in Flevoland Table 2: Relative importance of priority areas in period 1994-1999 in terms of public resources 1 Table 3: Relative importance of priorities in period 2000 - 20006 in terms of public resources 1) Table 4: Realised budgets per priority, Community share and structural funds, period 1994-1999 Table 5: Realised budgets in period 1994-1999, per type of contributor Table 6: Budgets per priority, Community share and structural funds, period 2000-2006 Table 7: Economic growth in all Dutch regions (development in volumes gross added value) Table 8: Operational objectives 1994-1999 and degree of realisation

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1 INTRODUCTION

Report nature: case study

Flevoland was eligible as an Objective 1 region in 1993 with an income per head below the 75 percent level of the average for the 15 existing member states of the European Union. Flevoland is the only region in the Netherlands that received Objective 1 status.

Aims of the study

The main objective of the overall study is to raise understanding of policies and their interactions, in order to improve the effectiveness of Community level interventions. More specifically, the aim of the overall study is to analyse the contribution of the Community policies (CPs) towards cohesion in terms of:

a) Impact on: - Wealth generated in the region, income and, in general, convergence (if there has been any); - Social cohesion and the improvement of quality of life, including other effects produced by the applications of CPs that are not directly related to convergence.

b) Coordination in the implementation of CPs.

c) The dimension of governance

Methodology

The focus of the case study is on both quantitative and qualitative information. According to the advice given by Labour, the following principles were followed:

- Particularly those Community programmes were analysed that are most relevant and have the greatest weight in the region.

- Statistical information covers a period as long as possible. In terms of structural policy, the period goes as far back as 1994, covering the different periods of Structural Fund programming (1994-1999 and 2000- 2006). In general, the aim here is to get a broad perspective, including the transformations that took place during the 90s.

- The impact of the policies and co-ordination aspects were studied rather than the policies themselves.

Quantitative information was gathered from the internet (www.cbs.nl and www.flevoland.nl). Also Labour Asociados and the Province of Flevoland have provided statistical information about Flevoland and The Netherlands. Guided by the ‘Work guide for the elaboration of the region report’ and published reports and studies1, indicators were

1 Naar een evenwichtig Flevoland, Europees vervolgprogramma Flevoland 2000-2006 Programmacomplement, Aanvulling op het Enkelvoudig Programmerings Document Flevoland 2000-2006 Statistiek van de werkgelegenheid en vestigingen in Flevoland, 2001

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FINAL REPORT (ANNEX I) selected in order to obtain some keys to the cohesion level on the region. The selected and available indicators are:

- Commuter traffic - Workplaces - Working population - Inhabitants - Participation by gender - Unemployment rate - Employment rate by sector - Regional GDP per capita - Economic growth - Job growth - Education level - Settlements - Development turnover.

Qualitative information was primarily obtained from key informants. Each of these respondents has a management role related to the Community policies. One of these was the programme manager co-ordinating all activities taking place in the context of social and economical developments supported by the European Commission.

In Flevoland, the European Programme is managed, monitored and controlled by the Programme Management Europe (PME), a special task force within the regional governmental organisation (Province of Flevoland). Each of the priority areas in the programme has a project manager. The following four interviews were held:

- Ms. J. van den Brink, programme manager PME - Mr. G. Gielen, project manager PME for development of the rural area - Mr. B. Pels, project manager PME for social cohesion and labour market - Ms. H. Boerrigter, project manager PME for improvement of production structure

Additional qualitative information was distracted from a document that included an ex- post evaluation of the Objective 1 programme in the Flevoland region for the period of 1994- 1999. That member state report Netherlands was based on desk research, financial information and interviews with key actors (Boot & Koppert, 2003).

The case study started April 2003. Information was made available to ITS by the Province of Flevoland, particularly the Final Report of the Programme Management Europe with respect to the period 1994-1999 (Provincie Flevoland, 2002a). This report is referred to as the EPD document in this case study report.

Eindverslag, Uitvoering Enkelvoudig Programmerings Document Flevoland 1994-1999 Flevoland, Gecombineerd Programmerings Document 1994-1999

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2 CONTEXT AND BACKGROUND

2.1 BASIC CHARACTERISTICS OF THE FLEVOLAND REGION

Flevoland as an Objective 1 region coincides with the administrative unit of the Province of Flevoland. This chapter provides a social-economic analysis of the Flevoland region and pays attention to the most import social economic indicators.

Geographical characteristics

Flevoland has a short history. The region had its origin in the second part of last century. Actually, the complete region consists of so-called polders. The region - and, accordingly, the administrative unit Province of Flevoland - consists of three polders. The land was reclaimed from the water area. The recent land reclamation took place in 1957 (east of Flevoland) and 1968 (south of Flevoland). The Northeast polder was developed a few decades before that time. It can easily be understood that the socio-economic infrastructure is still under development. Usually, the region is referred to as the new land as opposed to all ‘old land’.

The region is surrounded by water. The water partly is inland sea and partly border lakes between the old and the new land. Chart 1 shows the location of the region within the Netherlands and details the geographical structure of the region.

Chart 1 - Flevoland region: location within the Netherlands and geographical structure

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Inhabitants

The population size was 341.700 inhabitants ultimo 2001. The population between 15 and 65 years old was 227.000 (see Table 1). The population growth in the period 1994-1998 was 17,5%. This was an exceptional growth compared to the growth in the rest of The Netherlands (1%). The population growth is more than average as a consequence of both the excess of births over deaths and the high level of settlements. The proportion of living born babies per 1.000 inhabitants in 2001 was 16 percent. This is the highest proportion of all provinces in the Netherlands (source: CBS). Flevoland attracts especially young families from the urban agglomeration.

Income and unemployment

Flevoland received the Objective 1 status given the relatively low GDP (75% of the EU- average in 1993). The GDP per capita was considerably lower in the years before (68%). The main reason was that the size of labour force exceeded the number of jobs within the region. This was caused by the fact that Flevoland became a residential area for people from the Randstad, as the pressure of space in that area became very high. At the same time, a lot of people living in Flevoland are working in the Randstad.

The unemployment in Flevoland is concentrated in the two cities (Almere and Lelystad). 75% of the unemployed population lives here (Provincie Flevoland, 2002b). Not everybody took advantage of the economic boom in the same amount. Especially men, higher educated young people found a job. Another effect of the economic boom was also that unemployed people with a small distance from the labour market could easily be mediated to a new job.

Table 1: General characteristic data about the working population and employment in Flevoland 2001* Inhabitants (15-64 year) 1) 227.000

Working population 158.000 - employed 151.000 - unemployed 7.000

Working population in % of the population (16-64 year) (participation proportion) 70

Outward commuter traffic 69.000 Inward commuter traffic from outside Flevoland 28.000

Workplaces 133.443 - 15 hours and more a week 2) 110.278 - less than 15 hours a week 2) 23.165 * preliminary data, Source: Province Flevoland (1) year average (2) ever since 1999 the limit is 12 hour a week

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The number of registered holidays increased in 1998 to 6000 (+ 21% compared to 1997). The increase of the holidays was the biggest in the sectors hotel and catering industry, trade and transport.

Working population

The working population in Flevoland grew from 115.000 in 1995 to 158.000 in 2001 (preliminary data). The growth of the working population (1990-1998) in Flevoland was 5% higher than in The Netherlands. A large part of the growth can be subscribed to the increased share of women in the working population (CBS, regional data about labour, education and social security) and is also caused by the high amount of settlements (www.cbs.nl).

Participation

The average gross participation percentage for male (period 1995-1997) is in Flevoland 81% and in The Netherlands 75%. The participation grade for female in the same period was lower than for male but for Flevoland and The Netherlands approximately similar namely 50%. The net participation shows a similar pattern. The average net participation for male in Flevoland and respectively The Netherlands was 77% and 72% and for female 44% and 45%. The gross and net participation percentage is higher in Flevoland than in The Netherlands.

Education

The education level in Flevoland stays behind the national average. One of the reasons is the initial accent on social housing. This type of houses especially attracted the lower income group. Nowadays much more owner-occupied houses are being built. Therefore, differences in education level were reduced.

Commuter traffic

Commuter traffic can be distinguished in outward and inward commuter traffic. A growing number of people have to travel from the dwelling place to the workplace. A strong discrepancy exists between the inward and outward commuter traffic. The outward commuter traffic is much higher. Many inhabitants of Flevoland have a workplace outside the province. In 1998 56% of the working population had a job in Flevoland. The total volume of commuter traffic increased stronger than the national trend.

Gross domestic product

According to CBS statistics Flevoland had an average growth above the average nation growth in the period 1994-1997 together with three other provinces. The biggest growth took place in Flevoland (5,6%) due to the high number of company settlements in Flevoland. The growth in 1997 can predominantly be ascribed to trade, financial service and transport.

Another way of expressing the gross domestic product is per capita. In this way another picture of Flevoland is shown. The GDP per capita in Flevoland is the lowest of all provinces for years. The index has a value of approximately 70 (The Netherlands 100). An explanation could be that insufficient jobs were created resulting in relatively many inhabitants working outside Flevoland.

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Soil

Flevoland commissioned 12 environmental protection areas for soil because of their abiotic, biotic and cultural-historical soil values. These areas together include 31.363 hectare, this is about 20% of the province that is in total lying on the landside of the dike. These environmental protection areas are vulnerable for acidification, fertilization, drying out and disturbance.

Groundwater

Flevoland has 6 environmental protection areas for groundwater. A large part of South Flevoland is designated because of the thick clay layer that protects the groundwater quality in these areas. The main threat for the quality is the use and storage of animal manure, use of fertilizer and pesticides and the blocking soil layer. Rules were formulated for the use of fertilizers, pesticide in the environmental protection areas. Also rules were formulated with respect to other harmful actions such as the dumping of wastewater in order to tie up the treats.

Silence

Flevoland is a relatively quiet province. However, the quiet area is slowly reduced due to increasing road and rail traffic, traffic by air and industry. The administration designated five areas as environmental protection areas for sound. The total area is circa 6.200 hectare. In the environmental protection areas the sound may not exceed the limit of 35 dB(A).

Nature

There are 39 environmental protection areas for nature, in total 12.250 hectare. In all areas the deposit of acid materials is above the deposit aim for the year 2010 (1400 acid equivalent). Particularly along the border lakes the crossing is three times as high as the level of the aim. 51% of the environmental protection areas exceeded the limit for phosphorus in surface water. The objective for 2000 was to restore the hydrological situation in 25% of the dried areas.

2.2 PROFILE OF THE REGION IN TERMS OF DEVELOPMENT AND COMPETITIVE FACTORS

Flevoland had a low GDP in the late 1980s rather than a high unemployment rate. Unemployment almost exactly matched the EU average. The low GDP was mainly caused by the fact that the size of the labour force exceeded by far the number of jobs that were available within the Flevoland boundaries (Boot and Koppert, 2003). Flevoland showed a disproportionately high negative commuting balance (26% in 1989/1990). This was the highest of all regions in the Netherlands. The outgoing commuters consisted for a substantial part of people that had moved to Flevoland for purely residential reasons. As newly reclaimed and developed land, Flevoland compensated for the housing needs in the surrounding overcrowded regions on the ‘old land’, particularly Amsterdam. Flevoland was not high on the list of national regional development priorities. Especially regions that were in a transition process of restructuring (former mining area; former textiles industry area) were high on that list. Nevertheless, Flevoland faced several development problems.

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Development problems

Main development problems at the initial stage when Flevoland received Objective 1 status were according to Boot and Koppert (2003):

Economic structure: - over-representation of the agricultural sector and non-commercial services and under-representation of the industrial sector, transport and logistics; - over-representation of small and medium sized enterprises (SMEs); - local economy hardy benefiting from the richness and efficiency of the agricultural production in the region;

Labour market: - low qualification levels of the unemployed; - further increase of the professional population, not matched by growth in economic activity;

Productive environment: - weak intermediary organisations capacity and infrastructure; intermediary organisations lacked the staff and experience to support business; - weaknesses in the productive environment, such as an underdeveloped higher educational and knowledge infrastructure, particularly the absence of infrastructures and facilities in the field of technology and industrial development; - high congestion on transport infrastructure in particular on the linkages with the Randstad (Amsterdam, Utrecht); - poor living environment for the inhabitants in terms of urban facilities in the field of education, cultural facilities and public transportation.

The Flevoland faced the challenge to create thousands of new jobs, in the order of magnitude of 15.000, to accommodate the growth of the professional population between 1994 and 1999. Compensating the autonomous job growth estimated at 5.800 jobs, the additional number of jobs to be created by the Objective 1 programme was estimated at roughly 10.000 additional jobs.

3 COMMUNITY POLICIES IN FLEVOLAND

This chapter describes the Community policies that are relevant to Flevoland. The Community support is strongly related to the regional policies. The regional policy related to the Community policies is characterised by an articulated set of policy priorities. This was the case as off 1994 and is still the case. Meanwhile, the Programme Management Europe (PME) deliberately changed the set of priorities. Accordingly, this section describes both the first set of nine priorities that were prevalent in the period of 1994-1999 and the four priority areas that currently are valid in the context of the 2000 - 2006 programme (section 3.1). An overview of the relative and absolute importance of the European structural funds will be given both in qualitative and in quantitative terms (section 3.2).

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3.1 PRIORITY AREAS

3.1.1 Priority areas in the period 1994 - 1999

The general objective of the 1994-1999 programme was to make optimal use of the available potential for development in order to reduce the social-economic backward position, without damaging the quality of the natural environment.

Operational objectives were the following: - Improvement of the employment prospects and the standard of living of the labour force in the region; - Increasing the competitiveness of the local economy by stimulation of the own potentials and the attraction of investments; - To improve the economic and social cohesion within the region and within the Community; - Improvement and optimisation of the supply and demand on the labour market; - To protect and improve the environment in the region in order to improve the image of Flevoland as an attractive region for investments and living.

The general and operational objectives were translated into 8 priorities (and 1 technical assistance priority) in the 1994-1999 programme.

1. Priorities 1994 - 1999 2. Business development 3. Tourism and recreation 4. Agriculture and rural development 5. Fisheries 6. Human resources 7. Commercial infrastructure 8. Transport and communication 9. Research and development

Table 2 shows the priorities that were distinguished including the proportion of public resources afforded. The total public expenditures are shown including Community financing and state aids, province resources and resources provided by municipalities. Additionally, the proportion of Community resources for each priority area is shown.

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Table 2: Relative importance of priority areas in period 1994-1999 in terms of public resources 1) Priority area Share of total public Share of Community resources resources

Business development 9% 2) 15%

Tourism and recreation 4% 4%

Agriculture and rural 15% 18% development

Fisheries 6% 11%

Human resources 0,5% 0,5%

Commercial infrastructure 35% 11%

Transport and communication 19% 29%

Research and development 11% 10%

Technical Assistance 0,5% 1% total 100% 100% total amount in € 489 millions € 3) 101 millions € 3) 1. Source: EPD document (Provincie Flevoland 2002a), elaboration by ITS 2. All figures shown represent the realised budgets that may strongly differ from planned budgets and proportions presented elsewhere. Sources from the private sector are not shown here. 3. Support provided by ESF not included.

Table 2 shows that ‘commercial infrastructure’ and ‘transport and communication’ received most public resources. As far as Community support is concerned, ‘transport and communication’ was by far the mostly supported area with agriculture and business development as second best areas.

Each priority area included a number of measures. In total, 31 measures were distinguished2. Within each measure, projects were defined and carried out. A short description of the priorities follows. The description is based on Final Report EPD Flevoland period 1994-199 (2002) and Boot & Koppert (2003).

Priority 1 Business development The encouragement and support of local development initiatives and activities of small- and medium-sized enterprises was a main topic of this priority area. These activities

2 Different numbers of measures are being mentioned in documents. The PME Final Report mentions 34 measures. That overview is taken as a guideline here. Three of the 34 measures are related to ‘technical assistance’ whereas all others are related to real priorities. Boot & Koppert mentioned the number of 53 measures.

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FINAL REPORT (ANNEX I) include innovative measures, having the highest added value compared to other measures. This priority provided Flevoland with a whole set of new instruments with which business development in the region could be stimulated.

Priority 2 Tourism and recreation Tourism is generally considered to be a growth sector. Flevoland is a coastal region. That quality and the rural area provide potential for tourism development. However, the region was felt to meet only the minimum requirements with respect of tourist facilities and not capable of to attracting large numbers of tourists. That is why focus was to improve tourist attractions, accommodations and facilities and to improve the quality of human resources in this sector.

Priority 3 Agriculture and rural development This priority included a so-called “mixed bag” of measures, partly relevant for regional development, partly relevant to other objectives. The latter is particularly the case for the measures and schemes that were related to the agricultural sector. The objectives of these measures were more oriented towards development of the agricultural sectoral as such, than that they formed a logical and integrated element of a regional development strategy.

Priority 4 Fisheries Also some measures under this priority had a less clear relationship to the general objective of the programme of stimulating employment growth, and were evaluated by Ecorys-NEI as less appropriate elements of the programme strategy. It should be taken into account that some of the measures had exactly the opposite objective: breaking down the fishing fleet, thereby negatively contributing to employment creation GRP development. Also the other measures under this priority (education, promotion of aquaculture, processing and sale) had a very strong sector focus and seemed to contribute less to the Objective 1 goals.

Priority 5 Human recourses Activities under this priority focused on increasing employment opportunities within Flevoland and to solve the problem of the relatively high share of long term unemployed in the region. The measures were directed to the match between the skills of the labour force and the needs of (new coming) firms. This was done by providing education and training of the labour force and by providing work placements and subsidized jobs.

Priority 6 Commercial infrastructure This priority addressed the need for supplementary investments in infrastructure, where such investments strengthen the economic structure. In particular infrastructures in the field of industrial estates, office space and public investment in the living environment were dealt with under this priority. The issue of company premises was an important activity in this priority area.

Priority 7 Transport and communication This priority also addressed the need of supplementary investments in infrastructure, where such investments strengthen the economic structure, as mentioned in the ex ante evaluation. In particular infrastructures in the field of transportation were dealt with under this priority. The infrastructure contributes to the improvement of the productive environment of industrial and non-commercial services activities. A major project within this priority was the realisation of the connection between two motorways via the extension of motorway number A27.

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3.1.2 Priority areas in the period 2000 - 2006

During the implementation phase, the large number of measures limited the flexibility of the programme implementation. It was believed that the large number of measures had a negative impact on the financial absorption of the programme (Boot & Koppert, 2003). The number of measures was substantially reduced to 26 for the programme period 2000 - 2006 (32 including measures for technical assistance).

The PME formulated four priorities in follow-up programme 2000-2006. Every priority has its own project manager. The priority areas are the following.

1. Development of the urban area; 2. Development of the rural area including the village of Urk; 3. The improvement of the production structure; and 4. Social cohesion and labour market.

Table 3 shows the proportion of public resources afforded per priority area. The planned public expenditures are shown including Community financing, state aids, province resources and resources provided by municipalities. Additionally, the proportion of Community resources is shown for each priority area.

Table 3: Relative importance of priorities in period 2000 - 20006 in terms of public resources 1) Priority area Share of total public Share of Community resources resources

Development of the urban 45% 2) 31% area

Development of the rural area 14% 19%

Improvement of the 28% 31% production structure Social cohesion and labour 11% 16% market

Technical assistance 2% 3% total 100% 100% total amount in € 407 millions € 126 millions € 1. Source: Follow-up Programme Flevoland 2000 - 2006, elaboration by ITS 2. All figures shown represent the planned budgets. Sources from the private sector are not shown here.

The following description per priority area is based on the web site description by the PME (www.flevoland.nl).

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Priority 1. Development of the Urban Area The cities Almere, Lelystad and Emmeloord have seen a rapid development and accompanying impressive growth of population. The European Development Programme 1994-1999 has highly contributed to the realisation of many facilities for culture, leisure, sport and various other activities. Urban development, management and business support, innovations and modern technologies are other areas that heave attracted a lot of interest.

The objective is to create well functioning urban areas that will form a welcoming environment for new enterprises and offer possibilities for further development. Actions are planned in areas such as housing supply and the improvement of living conditions, revitalisation of city centres, the establishment of new business facilities and business centres, revitalisation of older industrial sites, development of multifunctional areas and so on. In residential areas, support for starting companies with artisan, industrial or other activities will be an important issue. The creation of small-scale employment for long-term unemployed is another point of attention. Interesting opportunities for tourism and leisure facilities are anticipated at the city edges and along the coastal area.

Further development of social and cultural facilities should lead to a further improvement of the quality of cities, which is important not only for the inhabitants and visitors but will also largely contribute to the business environment and the qualities national and international companies are looking for when choosing a new location. In this respect, good housing conditions and an excellent quality of life are certainly as important as good industrial sites and an excellent infrastructure.

Priority 2. Development of rural area The rural area not only has a strong agricultural sector, it also can be characterised as very dynamic. Development is aimed in particular at strengthening and improving the quality of all aspects of the rural area.

The important criteria are co-operation, creation of supply and product chains, increasing the added value in agriculture as well as improving tourism and the leisure industry. Projects show an integrated approach in order to make a valuable contribution to the rural area. Those parts of the countryside that border on residential areas will receive special attention also with restructuring and better accessibility creating good opportunities for leisure facilities. Other focus points entrepreneurs on the rural areas, a further increase of economic activities, improvement of the facilities and of the accessibility of the villages.

Development of village of Urk Urk has a particular position in Flevoland resulting from its dependence on fishery activities. The fishery sector will, however, be faced with further fleet reductions. The fish processing industry has scope for further development, in particular in new products and new markets. The right conditions also have to be established or improved in order to attract other economic activities, thus widening the economic base of locality. Food processing would be a logical addition to the existing strength of the town. As for leisure activities and tourism, the presence of the unique harbour with its surrounding historic quarters can certainly be regarded as a valuable asset.

Priority 3. Improvement of production structure A further extension and improvement of business facilities is necessary to keep pace with the latest demands in the in the international business environment of the 21st century. By doing this, Flevoland can both attract new companies and continue to offer the right conditions for a further expansion of businesses already established in the region.

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The improvement of the production environment focuses on promising industries such as information and communication technologies, medical technology, biotechnology, pharma- ceuticals, environment technology, food processing, metallurgic industry and processing of synthetic materials. Within this framework, activities will be targeted mainly on small and medium-sized companies. SME actions will particularly address innovation and inter- nationalisation, including the further promotion of e-commerce. Of course, large companies can profit from such support schemes too. Organisations offering business advice and support, venture capital and other innovative financial solutions or activities in the field of internationalisation and innovation are invited to send in their plans and proposals for the EPD.

Improving and extending facilities for training and education remains high on the agenda, in particular for higher education and professional training. Although Flevoland has a number of facilities, the total infrastructure for education and training is still not up to date. Attracting specific training facilities that can offer a significant contribution to the general business environment will also be important. The knowledge infrastructure is a further point of attention. Here, the aim is to achieve better spread knowledge and to establish links between sources of knowledge or experience and companies that can turn this into commercial successes.

Priority 4. Social cohesion and labour market Activities within the priority social cohesion and labour market aim to improve the position of unemployment and employees on the labour market. Within this framework, there are many links with the other parts of the EPD, such as the improvement of the production environment and the development of the urban areas.

Insufficient facilities for education and training are still affecting the regional employment market. The shortage is existent in both higher education and more specific facilities such as evening classes, apprenticeships and vocational training. SMEs in particular are demanding increasingly people with technical skills. The EPD aims training sessions with a focus on young and female unemployed. For the unemployed, the network of advice and support activities will be further developed in order to enhance their chances for a permanent job and better income.

Employees will be stimulated to further develop their skills, thus offering space for lower-skilled participants at the labour process. In order to reach large proportions of the labour force, programmes more particularly target the employers. For them, facilities will be initiated which give them the opportunity to offer their employees the training and education relevant to the job and the company. These activities will be carried out in close co-operation with local authorities, organisations of employers, unions and the training and education institutions in the region in order to get the best results possible.

A specific focus point is help and support for start-up companies. Flevoland has an excellent record, which is certainly worth keeping and improving. Another target group is handicapped people, where specific companies offering them a chance for a regular job will be supported. As for youngsters, the specific aim is to offer those who leave school without any kind of degree such education that they still stand a reasonable chance for a job.

3.2 RELEVANCE OF COMMUNITY POLICIES IN QUANTITATIVE TERMS

This section gives an overview of the relative and absolute importance of the European funds for the regional development in Flevoland.

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The management structure was split into an ESF-part and an ERDF/EAGGF/FIFG-part during the implementation in the 1994 - 1999 period. A separate office was responsible for the management of ESF in the region. The Flevoland PME Final Report covering this first programme period only included the ERDF, EAGGF and FIFG funds. Therefore, figures on total public resources and EC share are available for these funds (Table 4).

Each priority area was financially supported by only one structural fund in the first period. This principle changed in the 2nd period in which any priority area could be supported by more than one structural fund. This allowed a more integrated approach. It was also judged that the several bodies involved would co-operate in a more structural way by integrating the management of all funds including ESF.

The following four structural funds have relevancy to the programme in Flevoland:

- ERDF (Dutch: EFRO) - EAGGF (Dutch: EOGFL) - FIFG (Dutch: FIOV) - ESF.

Flevoland did benefit from Leader+ programme resources (EAGGF-) for the amount of € 2,9 million in the period 1995-1999. This contribution increased to € 5,5 million in the 2nd programme period (EAGGF-Orientation). Leader+ aims strengthening the social and economic vitality of the rural area. Great value is attached to co-operation and to the organisational capacity of local society in that programme. Flevoland receives € 0,25 million from the Equal programme for the years 2003-2004.

The Interreg programme provides support to the regionale development with particular focus on physical development fitting into land use planning. The following resources could be welcomed from Interreg II respectively Interreg III since 1999:

- ‘Nieuwe stedelijkheid’ North-west Europe € 365.000 - Cities with water front € 350.000 - NETA-1 € 40.000 - FLOWS € 97.500 - NETA-2 € 60.000 - Hanse Passage € 900.000.

Flevoland received Research&Development (R&D) resources for the amount of € 2 million. These resources were channelled through the Innovative Actions Programme. No overview exists with regard to the resources from the 4th and the 5th European Framework Programme that went to Flevoland. The community expenditures in the context of these framework programmes go directly to individual organisations.

The total contribution from the European Commission with the structural funds ERDF, EAGGF and FIFG was 100 million Euros (realised budgets, ESF not included). The total public resources that were provided (including both Commission and other public authorities) mounted up to 489 million Euros. It should be taken into account that also the private sector substantially contributed with 206 million Euros. The total resources for implementation of projects and measures in the 1st programme were 695 million Euros.

EAGGF and FIFG resources were allocated to one priority area each in the first period.

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Table 4: Realised budgets per priority, Community share and structural funds, period 1994- 1999 Priority total total EC Commu fund ERDF EAGGF FIFG state regional public resources nity share in share in share in share in share in resources in m €, expendit Commu Commu Commu public public in m € ESF 3 ure in % nity nity nity expendit expendit excluded 1) expendit expendit expendit ure ure 2) ure ure ure 1 Business 43,3 14,9 34,4 % ERDF 100% development 2 Tourism and 19,1 4,2 22,0 % ERDF 100% 15,5% 5,0% recreation 3 Agriculture 75,8 18,1 23,9 % EAGGF 100% - and rural development 4 Fisheries 28,7 10,7 37,3 % FIFG - - 100%

5 Human 2,2 0,5 22,7 % ERDF 100% - 0% resources 6 Commercial 170,5 11,3 6,6 % ERDF 100% infrastructure 7 Transport and 90,6 29,1 32,0 % ERDF 100% 47,6% 11,0% communication 8 Research and 55,7 10,5 18,8 % ERDF 100% development Technical 3,0 1,2 40,0 % assistance Total (in 489 100,6 20,5 % 71,2 18,3 11,1 million €) % Source: Provincie Flevoland-PME (2002), Uitvoering enkelvoudig programeringsdocument Flevoland periode 1994-1999; elaboration by ITS 1. Share in proportion of total public expenditure 2. Remaining shares besides Community share, state share and regional share come from municipalities and other bodies (private expenditures not included).

3 Since ESF resources were separately managed in the 1st programme period, those resources did not follow the priority structure of other funds. The ESF part of the programme was managed by Arbeidsvoorziening Flevoland.

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The split of resources by type of contributor is shown in Table 5.

Table 5: Realised budgets in period 1994-1999, per type of contributor Type of contribution Amount in m € Proportion of total European Commission 100,6 14.5 % State 97,1 14.0 % Province 21,9 3.2 % Municipalities 215,7 31.0 % Other public authorities 53,5 7.7 % Private sector 206,3 29.6 % Total 695,1 100,0 %

Source: Provincie Flevoland-PME (2002), elaboration by ITS

Table 6 shows the planned budgets for the 2nd programme period. In terms of absolute figures, the ERDF structural fund contributed the largest amount of resources in both programme periods. Also the ESF contribution was relatively large.

Table 6: Budgets per priority, Community share and structural funds, period 2000-2006 Priority total total EC EC structura ERDF ESF EAGGF FIFG public resources share l fund share share share share resources in m € in m € 1 Development 183 39,1 21% ERDF / 87% 13% - - of urban area ESF

2 Development 58 23,7 41% ERDF/ 38% - 37% 25% of rural area EAGGF/ FIFG 3 Improvement 114 39,5 34% ERDF 78% 19% 3% - of production /ESF/ structure EAGGF 4 Social 45 20,2 45% ESF - 100% - - cohesion and labour market Technical 7 3,5 50% ERDF/ assistance ESF/ EAGGF total (in million 407 126,0 31% 76,6 33,3 10,0 6,0 €) Source: Provincie Flevoland-PME, Naar een evenwichtig Flevoland, 2000-2006 (supplement, May 2001); elaboration by ITS

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A few differences in accents between the 1st and the 2nd programme period exist.

- The development of the region as a whole received more attention in the 2nd period. - Objectives were identified in a tighter and clearer way allowing evaluation based on indicators. - A clear distinction between urban area, fringe and rural area was made in the 2nd period. - The state played a substantial role in the 1st period whereas this role was less conspicuous in the 2nd period (particularly Department of Transport/Rijkswaterstaat and the Department of Agriculture). - Some priority areas received more attention in the 2nd period.

The development of the urban area, the labour market and SME/technology became more important in the 2nd period, especially in terms of resources. The decreased attention to agriculture and the rural area was a result of the shift in attention of the state. The Dutch Department of Agriculture did not participate anymore in the 2nd period. Nevertheless, rural development is one of the four priority areas whereas it was one / one and a half out of nine in the 1st programme period. A further difference is that the support of individual farmers and individuals processing agrarian products had to be replaced by support to the sector as such. This caused a decreased share of agricultural development in the programme.

Total Community expenditures in the 2nd period are at a somewhat lower level compared to the 1st programme period. Flevoland received about 150 million Euros (including ESF) in the period 1995-1999, whereas the Community contribution is 126 million Euros in the period 2000- 2006. Interreg provided m € 1,45 since 1999. Leader+ programme resources increased from m € 2,9 for the years 1995-1999 to m € 5,5 in the 2nd programme period. These resources are EAGGF contributions with suppletion from state, province, municipalities and private actors. Furthermore, Flevoland welcomes m € 0,25 from Equal for the years 2003-2004.

4 ASSESSMENT OF THE IMPACT OF THE COMMUNITY POLICIES RELATED TO THE SOCIAL AND ECONOMIC COHESION

Section 4.1 describes the impacts of the Community policies on social and economic development of the Flevoland region. Given the fact that the Community support necessarily accompanies state aids and also coincidences with financial support both from province and municipalities and private organisations, the specific degree of influence of the Community policies cannot be separated. Section 4.3 discusses the co-ordination in the implementation of community policies and the co-ordination between these policies and structural policy. Finally, section 4.4 discusses the dimension of governance.

4.1 REGIONAL DEVELOPMENT AND CONVERGENCE

The regional development and the convergence are described here at two levels. The first level is the macro level showing the development of Flevoland compared to all other regions in the Netherlands (see section 4.1). The second level refers to the objectives set in Flevoland against the background of the scope of the Community policies (see section 4.2).

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4.1.1 Social and economic convergence: the development of Objective I region compared to the development of all other all regions in the Netherlands

A crucial Community objective is to increase cohesion. Cohesion is assumed to increase when regional differences are actually mitigated. In case Community expenditures can be shown to correlate with decreased regional differences, particularly with respect to Flevoland that received Community support, the impact can be said to be substantial.

Regional economic development figures are available to identify the degree of convergence. The Central Office of Statistics (CBS) published economic growth figures for all Dutch provinces, including recent developments in the year 2002. Flevoland is one of the 12 Dutch administrative units (provinces). The region that receives support through the Community policies coincides with the administrative province of Flevoland. This matter of fact enables to have available official figures about economic growth and to compare them with other regions.

The figures published by CBS indicate the degree of economic growth in terms of gross added value (against basic prices). Figures were corrected for price increases. The information on economic growth distinguishes between the 1995-2001 period and the year 2002. The seven-year period 1995-2001 is of particular interest in the context of this study on the regional development given the fact that Community resources were provided just from 1994 onwards.

Table 7 shows the economic growth for all 12 Dutch provinces, including Flevoland.

Table 7: Economic growth in all Dutch regions (development in volumes gross added value) Region (province) Average growth in period Mutation 2002 in 1995-2001 in % comparison to 2001 in % Groningen 1,9 2,1 Friesland 2,8 -1,2 Drenthe 2,0 -0,8 Overijssel 3,0 0,1 Flevoland 6,0 2,4 Gelderland 2,8 0,1 Utrecht 4,4 0,5 Noord-Holland 3,5 0,2 Zuid-Holland 3,3 0,5 Zeeland 1,5 0,5 Noord-Brabant 3,5 -0,1 Limburg 3,3 -0,3

Source: CBS, press report 22 July 2003

Several interesting observations can be made from Table 7. First of all, economic growth in Flevoland appeared to be substantially higher compared to all other regions. The yearly growth in Flevoland was 6 percent. The average growth in the other 11 regions was half of the growth in Flevoland with a growth of 2,9% a year. None of the other regions realised a growth figure that comes close to the Flevoland growth figure. Irrespective of the precise Community policies, these CPs can be ascribed a remarkable effect.

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A second relevant observation is related to the recent economic growth in the year 2002. The economic growth in the year 2002 has severely decreased to a lower level. In fact, 4 regions showed a negative growth and others remained just at the positive end of the scale. However, Flevoland had still a 2,4% growth figure and had again the strongest growth. This growth is especially ascribed to the commercial services in the cities of Almere and Lelystad. Although economic circumstances deteriorated on all points, the relatively good performance of the Flevoland economy continued and remained positive. Also the Central Office of Statistics mentioned the contribution of the CPs to the positive development Flevoland in an explanation of the new figures on economic growth in the regions.

Economic growth partly due to CPs

It seems plausible to infer that Community policies have substantially contributed to the economic growth figure that was realised. Economic growth figures at the macro level indicate a relatively good performance of the Flevoland region. Summarising the figures shown in Table 4.1 Flevoland compares favourably with the average of all other Dutch regions:

Average growth in Mutation 2002 related Period 1995-2001 to 2001

Flevoland region 6,0% 2,4%

All other Dutch regions (11) 2,9% 0,15%

The figures allow concluding that CPs most probably contributed positively to the development of the region. The CPs contributed to a convergence process given the fact that Flevoland initially was behind the other regions.

There is a further indication for the contribution of CPs to the economic growth in Flevoland. It is assumed that approximately 25,000 new jobs were created by the CPs (source: PMR project manager and publicly expressed as such). Reality seems to have passed the challenge that was identified in terms of new jobs to create at the moment of the start of the European programme in Flevoland. The Objective 1 programme was estimated to create about 10,000 jobs additional to the autonomous job growth that was estimated at some thousands new jobs. Many new jobs had to be created in order to accommodate the growth of the professional population due to the expected increase of the human settlements (migration) and holding on to a stable net outgoing commuter level of 21,000.

The exact number of additional new jobs created with the help of the Community programmes cannot be identified. Irrespective of whether the order of magnitude is 10,000, 15,000 or 25,000, there is at the very least the suspicion that a substantial growth in new jobs was brought about by the CPs. However, it cannot be considered impossible that many new jobs would have been created without Community support for the region.

Flevoland ca not be said to be a poor region. The region is behind other regions because it has a very fast growth of population. Since the region is not poor, the region is able to substantially invest. Therefore, the Province administration could decide to invest to a high extent. A total investment impulse of about 1,0 billion Euros was realised. This investment scale exceeded the original aim of 0,5 billion Euro. This allows three conclusions:

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- Compared to the European support - in the order of magnitude of 0,15 billion Euros - a large multiplier effect of about 1 to 6 was realised. - The multiplier that was realised is larger than originally aimed at or expected. - The multiplier that was realised is quite high for an Objective 1 region.

4.1.2 Realisation of objectives

All actors involved in the Flevoland region have established quantifiable objectives in the programme 1994-1999. Six objectives were identified. The realisation of these objectives will be shortly discussed here. The information provided in this section 4.1.2 is mainly based on Boot & Koppert (2003) and Province of Flevoland - provisional final report on the SPD Flevoland (2002). The objectives and the degree of realisation are shown in Table 8.

The first objective was a GDP increase per capita up to 85% of the EU average. The GDP per capita increased from 75% of the average GDP of the EU in 1993 to 80% in 1999 (1997: 82%). This increase can be attributed to, among others, the economic growth in Flevoland over the period 1994-1999. The objective of 85% per head of the EU average was not reached. It should be taken into account that Flevoland has a function as a residential area to adopt overflow from the Randstad. This function resulted, as expected, in a high in- migration. The increase in employment opportunities was not sufficient to counteract this in- migration. A second element to take into account is the extension of the European Union that caused a lower general average and, therefore, a relatively higher position of Flevoland with respect to the EU average.

Nevertheless, the Flevoland region can be said to be successful in diminishing the gap with the EU average. However, Boot & Koppert (2003) observe that the gap with the Netherlands as a whole was not diminished, given the fact that GDP per head in the Netherlands in proportion of the EU average in the period 1994-1999 increased as well. This tendency does not completely match the tendency observed with respect to the CBS figures shown in table 7.

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Table 8: Operational objectives 1994-1999 and degree of realisation Objective 1994-1999 Realisation of objective Comments programme

GDP increase per capita up to Increase realised from 75% See text above 85% of the EC average to 80% rather than 85% A yearly employment growth Average annual growth more Since the growth of working of 3 points above the Dutch than 3% higher than figure population is high, increase of trend for the Netherlands jobs can hardly follow that trend. Region provides jobs for 69% of working population (was: 67%). Annual growth of gross added This objective was not As a relative important value per employee of 2% realised. producer of agrarian products, above the Dutch growth rate the region suffered a strong decrease in the agrarian prices. Measures to increase gross added value were mainly directed to the SME sector rather than the agrarian sector. Unemployment rate below Unemployment rate was in The unemployment rate the Dutch unemployment the whole programme not followed the trend in the level lower than the national rate. Netherlands as a whole. Rate in 2002 was 5% (Netherlands: 4%). Decrease of sub-regional Objective has been Sub-regional differences differences in unemployment achieved. decreased judged from the figures standard deviation trend that is decreasing for sub-regions across the years. Share of enterprises with Objective was met with 40% The share was already higher expansion investments at of enterprises compared to in Flevoland before the start of least the same as the the national figure of 33%. the programme. average Dutch share

It can be concluded that the employment developments in Flevoland have been quite prosperous over the 1994-2001 period and that the targets that were set have been achieved. However, the unemployment increased in 2002 but this again followed the trend for the whole nation. At the end of the first programme period, the unemployment rate was just as low as in the rest of the Netherlands. In 2002 the rate was slightly more negative. The expansion investments of enterprises in Flevoland remained higher than in the Netherlands as a whole. However, ‘despite this positive development, the GRP per head did not reach the stated objective of 85% of the European average GRP. Due to the enormous population growth of the last years, it is almost impossible to fulfil this objective, as the creation of jobs cannot keep up with this development’ (Boot & Koppert, 2003). A further relevant observation is that the sub-regional cohesion apparently increased given the fact that sub-regional differences in unemployment rates within Flevoland decreased judging by the standard deviation of the unemployment rates of the municipalities within the region. However, this decrease is not reflected in the general feeling about continuity of sub-regional differences: sub-regional differences are perceived to continuously exist (see also section 4.2).

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4.2 NON-FINANCIAL IMPACTS OF CPS - QUALITY OF LIFE

According to key actors in the field, the Community policies have induced effects other than of the wealth and economic growth type.

4.2.1 General effects

Stimulating sustainable policy with regard to regional development

It is clearly felt that the Community policies had initiating effects. It is strongly believed that less would have been realised without the CPs both in terms of regional policy as such and in terms of specific projects. National authorities were not in favour of a strong support of the Flevoland region. The feeling dominated that the Flevoland was left without substantial support in terms of resources for infrastructure and social and cultural facilities. The CPs enabled the Flevoland authorities to develop regional policy and to take initiatives more than could happen before. The CPs are ascribed a clear catalysing function in initiating developments such as partnerships.

An accelerating effect took place in the context of the national policy that focused on the development of residential areas. The CPs allowed to additionally pay attention to complementary policy and to realise infrastructure and diverge types of facilities rather than to be left with the development of residential areas without further complementary facilities.

Integrating effect

Although not explicitly stated by actors, it can be observed that the CPs evoked an integrated approach of regional development. Separate, individual actions and measures could find a place within the whole set of efforts to stimulate regional development. Overall targets were formulated. The Objective 1 programme is felt to enhance the tuning of separate measures and activities to each other.

Also a more informal impact was observed in the Flevoland region in addition to the more formally integrating impact of the European programme. It is generally recognised that the programme involved a lot of actors and, more importantly, brought together those actors. This evoked actors to put one’s shoulders to the wheel. A relevant observation is that the programme challenged actors to think along and this in itself already had a positive impact. It is felt that the European programme worked out as a binding agent. As such, the programme can be said to have both a formally integrating effect in terms of planning and a strong integrating effect in terms of social integration.

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Binding agent

At least in two areas it was positively stated that the European resources caused a strengthening of the societal structure. This integrating effect was observed in the area of improvement of the production structure and in the area of social cohesion and labour market.

Since there was a lack of structure between companies and organisations in the new land, the production structure in Flevoland did well by the European programme (ERDF) and the European resources. The latter were said to work as a ‘messenger’ and to create and strengthen the structure.

The Regional Platform for labour market policy in Flevoland brings together the divers actors in the field that were thought not to meet without the Regional Platform. This platform arised from the territorial ‘employment pact’ to improve the functioning of the labour market. Whatever the impact of the ESF programme, programme and resources evoke at least that actors come together, commonly address the labour market problems and consider innovative projects.

Impetus to a future regional policy

It is strongly felt that even without Community support after the year 2006 the region will have regional policy as a consequence of the current European support. The financial opportunities offered by the Community policies gave rise to the development of policy priorities with a long-term character. Priority areas were defined. Priority areas were reconsidered and redefined. Local needs and local initiatives could be arranged within those priority areas. The systematic approach also induced a clear communication towards society and all type of actor groups and allowed ex-ante and ex-post evaluation. Since resources provided in the context of the national policy are provided on a year-by-year basis, this long- term character facilitates a long-term regional policy. The long-term character of the CPs is felt to be a strong point.

Change in nations’ regional policy induced by Objective 1 programme

Boot & Koppert (2003) mention that the selection of Flevoland as an Objective 1 region changed priorities in nation regional policy. Flevoland was not on the priority list of national regional policies at the time of writing the Objective 1 programme. Flevoland did not receive any regional development support of the national government that time. However, the programme for Objective 1 regions brought forward a change in focus of national polity with regard to regional development.

Better accessibility of the region

It is strongly believed that impovement of infrastructure (oads) would not have been realised without the CPs. The share of expenditures in ‘transport’ in the programme (1994- 1999) was high and could be realised after hard negotiations with national authorities. The realisation of the connection between two highways (A27 and A6) and the upgrading of a road to a motorway substantially increased the accessibility of the Flevoland region. The following benefits were estimated prior to the realisation:

- shortened travel time: 5 minutes for 40,000 vehicles on a daily basis; - reduced chance of congestion on the N27 to less than 5%; - a reduced number of road accidents to an extent of 60 percent.

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The realisation of the works increased the attractiveness of the region for economic activities. A further effect was the better integration of the new land in the old land and, herewtith, the physical cohesion of Flevoland within the surrounding areas.

Better infrastructure of intermediary organisations

Infrastructure of intermediate organisations such as Chamber of Commerce was weak in Flevoland. The programme paid explicit attention to the subject and is succeeding in strengthening the intermediate level.

Mitigating weak points

Boot & Koppert (2003) refer to a SWOT-analysis of the region that was made at the occasion of the ex ante evaluation of the 2000-2006 programme. The result of this analysis was compared to the the analysis results of key issues in the region in 1994. Weak points that were identified in 1994 and that did not recur as weak points identified prior to the 2000-2005 period are:

- over-representation of SME / under -representation of large enterprises; - low qualification level of the unemployed; - underdeveloped higher education and knowledge infrastructure; - high congestion on the transport infrastructure.

Furtherance of the continuation of companies

The survival of individual companies is generally influenced by macro economic developments. Those macro developments clearly have more impact than individual programmes. However, it is felt that projects initiated in the framework of the European programme help companies to survive especially in the current economic recession. The impact now is maintenance of employment rather than extention.

Sub-regional differences hard to overcome

Strong differences within Flevoland do exist in term of origin and mentality. Many agrarian people came from the southern part of the Netherlands and townsmen came and are coming from the Randstad. As an inevitable effect, differences in mentality can be found among sub-groups in the region. The CPs are not expected to diminish thos differences. It does not take away that the difference unemployment rate is tried to take away. The unemployment rate in the urban area is higher than in the rural area. It is acknowledged that not all differences can be removed.

Environmental policy and regional development

Environmental considerations are a relevant dimension in assessing impacts of community policies. For example, creating job opportunities should not go together with negative environmental impacts. Community policies could also have effect on employment. The environmental dimension was not studied in detail in this case study. In general terms, EU’s environmental policy is felt to influence the regional development of Flevoland. Particulary specific Directives such as the Habitat Directive, the Nitrate Directive, the Birds Directive and framework directives Water and (soon) Noise are felt to be relevant to the regional development. These Directives evoke different assessments in terms of their restritive or stimulating character depending on whether an economic or an environmental point of view is chosen.

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Impacts not everywhere traceable

Although it is felt that the European programme contributed to regional policy and regional development, impacts are not always visible or measurable. As far as effects were identified indeed, the exact degree in which effects occur due to the European programme cannot always be determined. This situation is felt to exist particularly in the area of social cohesion and labour market where the the creation of a territorially based ‘treaty of employment’ with the involvement of all relevant political and societal organisations aimed to improve the working of the labour market. For example, underprivileged people could be helped to find a job where this was impossible without the programme but the exact proportion of underprivileged people that could be helped is not known.

Impacts not always attainable

Althoug the aim is to bring about positive effects by implementing a programme and by providing resources, reality does not always allow for clear impacts. This is particularly true with regard to the SME production structure. This priority area passes with more difficulty than the other priority areas. Reasons that cause the difficult development of the production structure are thought to be:

- The absorption capacity of business is limited. - The programme requires that public resoursces are brought in into a project. However, those public resources aren’t there. Municipalities have relatively and absolutely a few resources available. Out of all municipalities in Flevoland, the municipality of the city of Almere has available most resources but prioritises other type of facilities and public services. Organisations such as the Chamber of Commerce are relatively small and these organisations cannot provide high amounts of money to projects. Therefore, co-financing projects is problematic.

4.2.2 Effects related to agriculture and development of the rural area

Decreased deprivation in relation to other Dutch regions

Flevoland developed due to the Community support provided in relation to agriculture and rural development as follows compared to the the development in other Dutch regions (source: project management responsible for the development of the rural area).

- Steady growth of the biologically based agriculture that is stronger than in other Dutch regions. - Arrears in cultivation under glass were considerably made up. - The European programme forced agriculture to reflect upon the future, more than was the case in the rest of the Netherlands.

Specific achievements in Flevoland

The European support brought forward the following achievements worth mentioning.

- New knowledge-based institutions were brought in (a.o. the Centre for Biological Agriculture). - A concentration and extension of technological and fundamental research was realised. - New forms of co-operation were developed.

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- New chains have been developed and the sales structure was strengthened. - New products were developed.

Great succes failed to occur in the area of vey progressive agricultural products. Although such a succes was aimed for, the market appeared not to be mature enough for the new product(s) and relevant actors daren’t the risk. Farmers didn’t want to participate in the initiative in terms of responsibility and resources that were set as conditions by the PME.

The Leader+ programme that aims at an increased social and economic vitality of the rural area could not yet achieve results in terms of impacts. The year 2001 was mainly used for preparatory work whereas the year 2002 could be used to start up the process by initiating local groups or local action groups that could start with the projects. A total number of 45 projects ideas for Flevoland came in by December 2002 whereas 17 applications were officially made. Eleven projects received a positive advice (source: Annual Report Leader+ 2002, draft).

4.3 COORDINATION AMONG THE SET OF COMMUNITY POLICIES

Discussing the co-ordination among the set of community policies a distinction has to be made between the 1st programme period 1994-1999 and the 2nd programme period 2000-2006. Organisation changes were made for the 2nd period based on lessons learnt during the 1st period. In the 1st period, several bodies were involved in the programme management of the Objective 1 programme: the provincial specialist departments, the project office ESF and the Programme Management Europe (PME). The ESF project office was responsible for the management of ESF and the PME was responsible for the structural funds but operated from the province and was characterised by a spread across specialists departments. The management structure in the period 1994-1999 is discussed in more details by Boot & Koppert (2003). Whereas the implementation of the programme was integrated within the existing provincial organisation in the 1st period, the PME has clear steering mechanisms and decision power in the 2nd period. The PME acts as a managing authority and paying authority now and is responsible for all aspects of programme implementation from project selection until project finalisation. The drastic change in organisation had positive effects on the co-ordination of the community policies. The co- ordination aspects discussed below mainly refer to the current programme period (2000- 2006).

Integrated project management favouring a co-ordinated approach of CPs and allowing management of regional development

The way in which the CPs are currently managed within Flevoland indicates a high degree of co-ordination between Community policies. There isn’t any split in management between structural funds programme management and ESF. Also other CPs such as Leader+ and Interreg III are related to the PME. Both structure and decision power from project initiative to project end enhance co-ordination. Already the mere fact of the integrated management structure facilitates management of regional development. This favourable condition for regional development is still reinforced by the fact that the PME project organisation is endorsed by the existing provincial organisation that operates at the same regional scale and in which the PME as a project organisation is embedded.

Each of the four priority areas has a dedicated project leader as much as other programmes (Leader+; Interreg III; Equal) have their own project leader. Project leaders of the priority areas meet once a week to learn about project ideas, to decide on applications and to discuss current projects. This weekly consultation promotes the co-ordination.

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Without coordination fewer results

The strong degree of co-ordination allows project leaders to openly discuss the way in which the conditions for a new project are maximal to ensure the start and the good performance of a project. The mutual consultation enables projects to come to life that would not be liveable without this integrated approach. The background is that any project may receive resources from more than one European fund but is required to be split up into sub- projects (measures) each of which is financed from one source.

Rewards of good cooperation

A good example of a project that could come to life given the strong internal co-ordination within the integrated programme management in Flevoland is the realization of a restaurant operated by mentally disabled people. The building could be realised with the help of ERDF resources. Guidance and support of the mentally disabled was paid from ESF funds. To this end, the project was split into two separate measures. Taken together, a project that required input from different types of funds could relatively easily realised by combining ERDF and ESF components.

In case the approach would have been exclusively from the ERDF perspective or exclusively from the ESF point of view, the project would not have been realised at all. Another example is the realisation of a number of learning-by-doing companies for e.g. labour rhythm. ERDF could be used to realise renovation and automation whereas ESF resources could be used for exploitation of teaching personnel and costs of participants. Project leader ‘labour market’ and project leader ‘improvement of production structure’ commonly prepared the project.

Integrated communication

Substantial attention is given to communication in the 2nd programme period. An elaborated plan of communications was prepared. Actors in the field were informed of opportunities, projects and experiences through brochures, newsletters, web site, radio spots, CD Roms and networking. Relevant here is the fact that the communication takes place in an integrated way. All actors and organisations in Flevoland involved in the European programme are periodically informed about projects and activities irrespective of the specific programme. The European support to Flevoland is treated as one unified master activity.

Coordination at the higher level

Co-ordination between Community policies is continuously receiving attention at the national level. At the political level, the State Secretary of the Ministry of Economic Affairs is the member of government who is co-ordinating for the European Structural funds. The ministry is involved in the Supervisory Board of the European programme in Flevoland that supervises the broad outlines. This includes intensive consultation on the Community policies all together including co-ordination. Flevoland is involved in general consultations around Objective 1 programme, Objective 2 programme and other communitarian initiatives.

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4.4 GOVERNANCE ISSUES

The experience in Flevoland with the CPs gives rise to a set of observations that have in common their governance related character. These observations are mentioned her point by point. Some of these points indicate positive aspects; other points are more neutral or focus on barriers that hamper the implementation of the programme. All aspects were expressed as experiences or views in the interviews held unless otherwise mentioned.

Positive aspects

• The Community policies clearly stimulate to work systematically according to plans.

• The Community policies require working with a long-term perspective. Priorities can be defined beyond the short-term, often usual perspective of one or two years ahead. Agreements with other actors such as municipalities or state have been laid own for a number of years. This long-term character increases the quality of regional policy and, herewith, of regional development (see also 4.2.1 under ‘impetus to a future regional policy’).

• The European Programme Document came about in cooperation with local actors and national authorities. As a consequence, frequent checks on the consistency of the programme or specific projects with local or national policy are not needed.

• New project ideas come in at an early stage allowing all necessary types of tuning and consultation, also with the specific departments in the province administration. This procedure ensures a timely embedding of the potential project in the current policy.

• Initially, the ESF project office operated separately from the province in the regional employment office. It was felt that the new integrated PME project office including ESF and structural funds evoked a higher level of attention from the province administration.

• The integrated approach allows to quickly identifying insufficient financial absorption. Additionally, the ‘decommitment n+2 rule’ that requires the organisation to have spent the resources of the year n ultimately in the year n+2 forces to better plan and to work systematically rather than to postpone work to the end of the programme period. Flevoland succeeded to meet the n+2 rule for the year 2000 meanwhile.

Discrepancies

• An obstacle experienced is the discrepancy between the region, in this case Flevoland, and the nation in determining whether or not a project is innovative in character. It happens that a project is thought to be innovative for the region Flevoland rather than for the nation (different importance of a criterion). By consequence, the state does not want or is not able to provide resources in those cases. This particularly happened with the Ministry of Agriculture.

• Requirements set by the national authorities can be more demanding than the requirements from the European programme perspective. National authorities

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frequently required additional conditions before agreeing with projects. For example, the Ministry of Social Affairs and Employment imposed extra conditions that were not required by the European programme. Partly different requirements complicate project realisation.

• A specific difficulty is related to the co-financing of ESF funded projects. The maximum percentage of support to be given by PME is 44 percent. The rest is to be co-financed. However, the province administration does not provide this co-financing to this part of the programme and the Department of Social Affairs stopped providing resources for this type of projects.

• The EAGGF fund evokes a different type of difficulty. Each separate project initiative has to be approved by the Ministry of Agriculture, Nature Conservation and Fisheries in order to receive state aid. However, any project that is classified by the Department of Agriculture within a regulation that applies nation-wide is excluded from European programme resources. The background of it is the matter of fact that national policy is supported by the EAGGF- guarantee part. Co-financing can only be approved in case the project can be defined under the orientation part of EAGGF. Since the state is easily inclined to define a project idea in terms of a regulation, PME is inevitably withheld from supporting the project. This causes failure of project realisation. This situation hurts the more given the history that the 1st programme period learned that it was difficult to receive sufficient applications whereas now a situation occurs with sufficient applications but with high risk of failure given the co-financing problem.

Incongruent scopes

The observations discussed here indicate that incongruent scopes at different levels of public administration sometimes work out as obstacles to project realisation in practice.

Project initiatives can fail to meet at the same time different sets of criteria that are used by different authorities.

Project initiatives may meet a criterion that is applied by more than one authority. Since each authority has its own framework and priorities, a project still may fail to be set up. An example is the degree of innovation of a project.

Promising projects may break down as a consequence of difference in scope of authorities. Flevoland experienced this type of failure especially in the context of the EAGGF fund. Flevolands' scope is to realise individual projects with a tailor-made approach, whereas the Ministry of Agriculture is inclined to choose for a unified approach with a tendency to surpass above the individual project and to follow general regulations. The latter approach prevents Flevoland from using European support.

• The priority area ‘improvement of production structure’ faces typical problems. Here, the problem is mainly related to the procedure that ‘Brussels’ has to approve projects before firms can be afforded any resources. The programme management has to present projects for approval before resources can be confirmed. However, the time horizon of companies (‘to-morrow’) does not match with the time horizon of the European programme procedures. The tight regulation around support to firms prevents from a fluid realisation of projects in this area. An additional problem is the fact that the capacity of absorption of

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business in Flevoland is limited. There are only a few companies that can make an appeal to the ERDF fund.

• Also bureaucratic discrepancies that complicate the work are experienced. National authorities require PME to submit reports on a quarterly basis whereas the European Commission follows a trimester schedule. Additionally, the type of information requested to report on is different for the national authorities and the European Commission.

Match with national policy and with the regional and local policy level

Boot & Koppert refer to the degree of synergy between administration levels in their member state report Netherlands (Objective 1, 1st programme period). Particularly the match of the regional policy with national policy was discussed. Referring to the 1st programme period, they observe that the match with national policy is not that clear as Flevoland was not on the priority list for regional development support. ‘This caused in the beginning some problems with the co-financing by Ministries. With most ministries these problems were solved, but the match between the programme and the priorities of the Ministry of Agriculture, Nature Conservation and Fisheries remained limited.’

Boot & Koppert mention that also policies at the regional (province) and the local level had to be adjusted. ‘Adjustments in the local policy and in the divisions of the budget had to be made, in order to be able to implement the measures of the Objective 1 programme. The match with the regional policy is better, as the programme is partly based on the priorities already set.’

Generally it can be said that province, municipalities and the private sector have largely contributed to the region. The Ministry of Transport strongly contributed in the 1st programme period. The 2nd programme period shows a substantial decline of state contribution. The Ministry of Agriculture, Nature Conservation and Fisheries has withdrawn participation. The Ministry of Economic Affairs has committed itself to contribute € 13,5 million for the 2nd programme period. The province of Flevoland contributes about € 27 million.

Community support to Flevoland will stop after elapse of the current programme period. A big risk is that the state will not adopt the role of ‘Europe’ to further develop regional policy. In fact, this is a severe threat and this risk severely harms the regional development policy that could be developed due to the CPs.

5 CONCLUSIONS

Macro level: economic impact

Cohesion is assumed to increase when regional differences are actually mitigated. In the case of Flevoland Community expenditures correlate with decreased regional differences. Economic growth figures at the macro level indicate a relatively good performance of the Flevoland region.

- The economic growth in Flevoland (gross added value against basic process) appeared to be substantially higher compared to all other Dutch regions in the period 1995-2001. The yearly growth in Flevoland was 6,0% whereas the average yearly growth in other regions was 2,9%.

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- Flevoland had still a 2,4% growth figure in the in the year 2002 when the economic growth severely decreased to 0,15% nationwide.

All in all, it seems plausible to infer that Community policies have substantially contributed to the economic growth figure that was realised. The objective to increase the GDP per capita up to 85% of the EU average was not reached yet (was: 75% in 1993; is 80% in 1999). The increase in employment opportunities was not sufficient to counteract the high population growth (in-migration) that is typical for Flevoland.

A total investment impulse of about 1,0 billion Euros was realised. This investment scale substantially exceeded the original aim of 0,5 billion Euro. Compared to the European support - in the order of magnitude of 0,15 billion Euros - a large multiplier effect of about 1 to 6 was realised.

Meso level: quality of life

Community policies (CPs) have induced a number of relevant non-financial impacts. Generally, these effects have a positive impact on the quality of life. The following impacts could be observed.

• Stimulating integrated regional policy development The CPs enabled the Flevoland authorities to develop a regional policy. Since the regional development of Flevoland was not a priority within national policies, the development of a regional policy did set a robust framework for the development of the region. This allowed taking initiatives and initiate projects more than could happen before. An additional substantial advantage of the Community support was that the CPs evoked an integrated approach. A further result is that the region will have a regional policy framework even without Community support after the year 2006.

• Increased social integration The Community policies attracted a lot of actors and organisations and the European programme worked out as a binding agent and strengthened societal structure by creating liaison between companies and organisations also resulting in a more robust infrastructure of intermediate organisations.

• Mitigating weak points Specific quality aspects of regional development that were identified as weak points prior to the start of the programme did not recur as such prior to the 2nd programme period. The following weak points were mitigated judging by a SWOT analysis made prior to both the 1st and the 2nd programme period: under- representation of large enterprises; low qualification level of the unemployed; underdeveloped higher education and knowledge infrastructure; high congestion on the transport infrastructure. However, other weak points remained weak points and new weak points were added. Boot & Koppert (2003) conclude that ‘there were improvements on the weak points indicated at the start of the programme but are still not at the desired level’.

Programme effects, however, cannot always be identified, as they are invisible or not measurable. As far as effects were identiefied indeed, the exact degree in which effects occur due to the European programme cannot always be determined. This situation is felt to exist particularly in the area of social cohesion and labour market. For example, underprivileged people could be helped to find a job where this was impossible without the programme but

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Coordination of Community policies

The CPs in Flevoland are managed by the programme management (PME) that has clear steering mechanisms and decision power. The PME is responsible for programme implementation. The integrated management structure that was chosen for the 2nd programme period enables the systematic management of regional development. The programme management is endorsed by the existing provincial organisation that operates at the same regional scale. The integrated management has enabled projects to come alive that would not have been realised without such management structure. Also an integrated way of communication towards actors in the field is an exponent of the integrated management structure.

Governance

The Community policies have brought about two essential features of governance:

• CPs stimulated to work systematically according to plans;

• they allowed working with a long-term perspective.

These features increased the quality of planning and the quality of regional development.

A timely consultation with the specific specialist departments in the province and with national authorities resulted in the relatively smooth embedding of new projects. However, discrepancies caused delay or project failures. Discrepancies of the following types could be identified:

• The use of different sets of criteria by different public authorities. • The different appraisal of a criterion by different authorities; • The different time horizon of business and European procedures. • Incongruent scopes at different authority levels could work out as obstacles to project realisation in practice. This particularly applied to EAGGF related project initiatives.

A real risk is that the national authorities will not adopt the role of ‘Europe’ to enhance the regional development of Flevoland after 2006 when the Community support to Flevoland will end. This could severely threaten the implementation of regional development policy.

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6 GUIDELINES FOR COMMUNITY ACTION

The following actions are recommended from the Flevoland experience. These recommendations emanate from the experiences of project leaders.

a) Structural funds are also important for the more prosperous western member states. Regional policy making is felt to be both relevant and successful. From the point of view of the province, regional policy should continuously be accomodated even within the context that the state is inclined to dispute the relevance of structural funds for relative rich member states.

b) Community policies will benefit from the appointment of an Europe co-ordinator in every municipality. This will serve a useful purpose both in initial stages of project or project ideas and in later stages of project realisation.

c) Regional policy would benefit from a a higher degree of integration of funds in that sense that one measure should be open for more than one fund.

d) The Flevoland experience indicates that bringing together programmes and funds into one project organisation is effective. It would also enhance the realisation of an integrated programme for the regional development.

e) As far as business is concerned, the attitude is to proceed ‘to-morrow’ which is different in scope from the procedures related to the European programmes.

f) The international dimension could be used more explicitly as shown in the Leader+ or the Equal programmes. It is felt that the exchange of knowledge with measures or projects of the same kind carried out elsewhere in any European region would be efficient and effective. Furthermore, testing specific ideas or principles for regional development in more than one European region is also advocated.

g) Really innovative projects should not be required to meet all usual bureaucratic requirements in the starting phase. It would help get projects off the ground more than is the case now.

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BIBLIOGRAPHY

• Central Office of Statistics (CBS), Economie krimpt in vier provincies. Press report 22 July 2003.

• Commissie van de Europese gemeenschappen (2002). Mededeling van de Commissie: Eerste voortgangsverslag over de economische en sociale cohesie. Brussel.

• Commission of the European communities (2003). Communication from the commission: Second progress report on economic and social cohesion. Brussel.

• Boot, L. en S. Koppert (2003). Ex post evaluation Objective 1 1994-199, Member state report Netherlands. Ecorys-NEI, Regional & Urban Development, Rotterdam.

• Europese Commissie, Bureau voor officiële publikaties der Europese Gemeenschappen (1996). Flevoland: Gecombineerd programmmeringsdocument 1994-1999. Luxemburg.

• Labour Asociados (2002). Aanalysis of the impact of community policies on regional cohesion. Madrid.

• Labour Asociados, Contribution of Community policies towards social and economic cohesion: Work guide for the elaboration of the region report. Madrid.

• Leader+ (2003). Jaarverslag 2002 Leader+ Regio Randstad (draft).

• Provincie Flevoland, Programma Management Europa (2001a). Programmacomplement: Aanvulling op het Enkelvoudig Programmerings Document Flevoland 2000-2006. Lelystad.

• Provincie Flevoland cluster Onderzoek en Dataverzameling (2001b). Statistiek van de werkgelegenheid en vestigingen in Flevoland 2001. Lelystad.

• Provincie Flevoland, Programma Management Europa (2002a). Eindverslag: Uitvoering Enkelvoudig ProgrammeringsDocument Flevoland periode 1994-1999. Lelystad.

• Provincie Flevoland, Programma Management Europa (2002b). Naar een evenwichtig Flevoland: Europees vervolgprogramma Flevoland 2000-2006. Lelystad.

• www.cbs.nl www.flevoland.nl

LIST OF ABBREVIATIONS

• CBS Central Office of Statistics in the Netherlands

• CP Community policies

• GDP Gross Domestic Product

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• ITS Institute for Applied Social Sciences, University of Nijmegen-NL

• PME Programme Management Europe in Flevoland

• SME Small and Medium-sized Enterprise(s)

Index of tables included in ANNEX II

Although the EPD programme 1994-1999 formally covered that 1994-1999 period, the implementation of the programme projects predominantly was in the years after that period. Therefore, statistical data included also the years 2000 and 2001. No data were available for the year 2002. The diagrams included in this Annex show successively:

- Inward and outward commuter traffic - Gross participation rate male - Gross participation rate female - Nett participation rate male - Nett participation rate female - Unemployment rate male 1994-1999 - Unemployment rate female 1994-1999 - Proportion employed working population (15-64 years) - Proportion unemployed working population (15-64 years) - Registered unemployment in proportion of the working population - Average growth employed population by gender (1990-1998) - Average growth working population (1990-1998) - Percentage regional GDP per capita 1993-1997 - Percentage economic growth - Development turnover in percentage of the year before - Education level 1990 - Education level 1998 - Population growth in percentages - Settlements by 1.000 inhabitants - Percentage job growth in relation to the year before.

The data could be taken from two main sources: - Provincie Flevoland, Programme supplement ‘Naar een evenwichtig Flevoland’, 2002; - Central Office for Statistics in the Netherlands (CBS). Most data were processed by ITS and transformed into graphics.

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ÖSTERREICH/AUSTRIA:

REGION: STEIERMARK

ELABORATION:

Author: Michael Erhardt

From: E W R CONSULTING GMBH. FRANKFURT AM MAIN.

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF STEIERMARK (STYRIA). AUSTRIA/ÖSTERREICH

EXECUTIVE SUMMARY

When Austria joined the EU, Styria's GDP per head fell short of the EU15 average by 8%. This gap has been halved steadily until 2001. In 2001, the unemployment rate totalled 3.5% - well below the EU level. In terms of employment, the economic structure is (relatively) dominated by industry (33%) and agriculture (8-9%) while the service sector plays a relatively minor role (58%). Particular development potential is to be found in the technology sector and related production and services.

Styria is distinctly segmented in topographical respect. The mountains impede accessibility and connections between sub-regions considerably. Therefore, significant differentiation can be noticed between sub-regions where agriculture and forestry are prevalent almost exclusively and sub-regions where differentiated economic structures have developed. Accordingly, population in the Graz sub-region increased by 3.9% from 1991 to 1998, while eastern Upper Styria's population decreased by 3.3% during the same period. Further decline in Upper Styria's population numbers has been predicted, while further population growth is expected in agglomeration areas. Unemployment rates display intra-regional differentiation as well.

In Styria, financial means derived from the projects EFRE, EAGFL, Leader, ESF and INTERREG are applied successfully. Also EU’s environmental legislation has had a significant impact. Last but not least, Austria’s accession to EU and the challenges of the Common Market and the Common Currency resulted in changing attitudes and behaviour of economic protagonists. As a side-effect, an outstanding culture of promotion and evaluation developed.

EU assistance in general has resulted in an increased realisation of projects in necessary restructuring. On the other hand, increased support for these projects was facilitated. The Structure Funds period along with the planning of programs covering an extended period brought about a continuity of implementation regarding both financial means and the capacity for planning. Finally, this has had an impact on the balance of success:

In the 1995 to 2001 period, the number of newly established enterprises soared from 1768 in 1995 to 3681 in 2001. In total, 19 594 businesses have been established during the 1995-2001 period. Additionally, the region's locational attractively increased and resulted in the creation of highly qualified jobs and the location of matching enterprises. Hence, the region's susceptibility to crises has been reduced as well. The technology sector presents a core or cluster of self-

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FINAL REPORT (ANNEX I) sustaining development. This favourable development has been attributed to regional promotion's positive incentives regarding increased research and development activities in Target 2 Areas.

Promotion of modernisation and structural change in existing companies has safeguarded jobs and has reinforced primarily the position of small and medium- sized enterprises.

On the other hand, it cannot be dismissed that large companies received financial assistance and did not repay these amounts after they re-located.

Styria's environmental situation is evaluated favourably. Problems include increasing traffic, area consumption, urban sprawl in agglomeration areas (southern Styria) and low air quality during the winter.

EU's environmental policy did not bring about substantial additional impact on environmental quality as European objectives had been realised generally on national initiative. On the contrary, EU's environmental policy resulted in increased bureaucratisation due to more extensive statistics and reporting duties.

An initiative to demonstrate possible synergies between reduced resource consumption, reduced impact on the environment and companies’ cost cuttings was introduced rather early in Styria (Ökoprofit Graz). In general, EU's environmental policy has had positive effects on employment (environmental technology, engines, sewage, waste, scrap recycling, consulting). This concerns technicians and environmental consultants primarily. National emission limits, however, do have negative impacts on employment because re-location of enterprises is foreseeable due to the accession of Eastern European countries maintaining lower standards and long transition periods which substantially exceed investment cycles of companies. The Directive on Volatile Organic Compounds is considered counter- productive as it results in disproportionally high costs on part of many SMEs. For thousands of SMEs, minor emissions have to be accounted for and penalties have to be imposed for minor defaults. In this respect, the effective removal of major emittants should be given priority (realisation deficits in many European regions). Moreover, suspicion prevails that other countries are gaining competitive advantages by neglecting to control the implementation of directives seriously.

Three EU General Directions, three Austrian Federal Ministries, three Regional Ministries and diverse subordinate administration units are concerned with EU's public aid to support Styria's development. Therefore, both the regional and the local level of administration face acute challenges regarding co-ordination of resources and administrative procedures.

Particular problems originate from dissimilar financial regulations concerning EFRE and ESF, from the slow start of programs and the introduction of regulations when programs are already approved. Furthermore, the demarcation of EAGFL-A and EFRE has been difficult at times. As far as connections of Community Initiatives to Structural Funds is concerned, different implementation of regulations occurred. Different accounting periods are reported to have been a problem as well. In

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Co-ordination within the administration is assessed to be working well. On the local level, seven agencies to enhance co-ordination with private protagonists were established. These agencies exceeded their original tasks and developed into regional co-ordination agencies. Vertically, co-ordination of protagonists is the responsibility of the Economic Promotion Organisation which keeps in touch with enterprises, deals with R&D on the enterprise level and maintains connections to scientific R&D institutions as well. Lack of control co-ordination is lamented widely and has resulted in multiple control of protagonists.

Participation of economic and social organisations and other protagonists is taking place primarily in program planning. In the Supervision Committee, strategic orientation is being discussed and modifications of the EPPD are decided. On the project level, regional management agencies are the most crucial hinges regarding local participation. Participation, however, suffers from a negative attitude towards the EU bureaucracy, which in some cases extends even to rejection of EU aid because the accompanying expenses are seen as intolerable.

Parallel to EU aid regulations, an excellent evaluation culture developed in Styria, which resulted in more intense reflection of measures and increased efficiency of implementation of national and regional aid. Transparent monitoring and accounting systems, as well as conscious and efficient treatment of funds are among inadvertent consequences of EU financial assistance. Furthermore, programs reinforced co-operation structures and -culture, public relations and communication among protagonists have been intensified significantly.

Last but not least, municipalities established alliances and developed a common regional identity.

From a cohesion viewpoint, some Styrian sub-regions require future assistance in order to diversify from agriculture and forestry to tourism. Otherwise, these sub-regions are effectively uncoupled of general development.

Promotion of enterprises which potentially re-locate once they received public aid appears less sensible than promotion of infrastructure which remains in the region.

Future potential is to be found in environmentally sound agriculture which cannot, however, grow and persist without subsidies given the prevalent conditions.

More explicit demarcations between single funds have been suggested, as well as clearer and more simple execution directives by the European Commission and better adjustment between General Directions. Probably, one single EU Fund would be able to end all problems concerning diverging schedules, regulations etc. Finally, unacceptable multiple controls and disproportionality of bureaucratic expenses and realised yield should be terminated.

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INDEX

1 COMMENTS ON THE ACTIVITIES

2 CONTEXT AND BACKGROUND 2.1 GEOGRAPHICAL SETTING 2.2 POPULATION DEVELOPMENT 2.3 ECONOMIC DEVELOPMENT 2.4 ENVIRONMENT 2.5 MODEL OF DEVELOPMENT

3 MAIN UNION POLICIES 3.1 INTERNAL MARKET COMMUNITY POLICY AND REGIONAL DEVELOPMENT 3.2 CAP 3.3 EU’S ENVIRONMENTAL POLICY 3.4 RESEARCH AND DEVELOPMENT 3.5 PUBLIC AID

4 ASSESSMENT OF THE IMPACT: MAIN RESULTS 4.1 AGRICULTURE 4.2 INDUSTRY AND SERVICES 4.3 ENVIRONMENT 4.4 INTERNAL COHESION 4.5 EXTERNAL COHESION

5 COOORDINATION

6 GOVERNANCE ISSUES

7 CONCLUSIONS

8 GUIDELINES FOR THE COMMUNITY ACTION

BIBLIOGRAPHY

Index of tables

Overview 1: Basic geographical data

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1 COMMENTS ON THE ACTIVITIES

The case study is based on a series of interviews, which themselves had been based on structured questionnaires dealing with the following topics:

EU policy in general Agricultural policy Environmental policy Public aid And co-ordination/governance.

Data have been drawn from reports or provided by Styria's government departments for agriculture, economy and environment and Styria's economic promotion.

2 CONTEXT AND BACKGROUND

2.1 GEOGRAPHICAL SETTING

Styria is situated at the European Union's current eastern edge. The common border with acceding country Slovenia is 145 km long. One part of the region is situated in the Alps, the other at the mountains' southern edge. It encompasses an area of 16.388 km², of which 76% are mountains.

2.2 POPULATION DEVELOPMENT

Population is concentrated in the Graz area; population density being 1.773 inhabitants per km² in the city proper and 119 inhabitants per km² in the suburbs. Besides Graz, only the Leibnitz sub-region surpasses a population density of 100 inhabitants per km² (111 inhabitants per km²).

Apart from Graz, the regional capital, (226 000 inhabitants), in Styria there are only seven cities within the range of 10 000 to 30 000 inhabitants. The majority (61%) of the 543 towns and municipalities are inhabited by less than 1500 people. This community structure has prevailed more or less unchanged for decades. The development of the population's regional concentration is characterised by a sub-urbanisation process around Graz. In the past 30 years, the city has lost about 23 000 of its inhabitants; during the same period, its suburbs have gained 31 000 inhabitants. The difference between both developments demonstrates the increasing regional concentration of Styria's population in the capital's agglomeration area. Gains of the Weiz (+9%), Leibnitz (+8%) and Hartberg (+7%) districts have been more noticable in relative terms, but less in absolute numbers. On the other hand, population decreases significantly in the Leoben (-22%), Bruck a.d. Mur and Mürzzuschlag (- 12% respectively) as well as Judenburg (-11%) districts.

Since 1971, population development in 10-years-periods has been extraordinarily steady in all of Styria's 17 districts. In total, a very slight decrease is noticable (1971 to 2001: –1%). Prognoses predict a more pronounced population decrease in the future.

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For topographical reasons, costs of overcoming distances are high and impede intra- regional cohesion of the sub-regions.

Foreign citizens' share of the population has been rising constantly since 1981, but is still rather low (4.5%) in 2001. Even in Graz, this proportion amounts to less than 10%.

Employment ratio totals 45%, there being substantial discrepancies between men (56%) and women (35%). Among sub-regions, gaps of up to 6 percentage points for men and up to 10 percentage point for women (Graz 40%, Mürzzuschlag 30%) occur. Women's employment ratio has been rising steadily.

Overview 1: Basic geographical data Area Utilisation Styria Austria

Area in km² 16.388 83.858

of which permanent settlements in km² 4.957 31.917

Inhabitants per km² 72 96

Inhabitants per km² in permanent settlements 239 253

Source: Statistik Austria: ISIS-Datenbank, LASTAT Steiermark, Univ. Graz, Institut für Geographie, Joanneum Research Graz: Institut für digitale Bildverarbeitung.

2.3 ECONOMIC DEVELOPMENT

When Austria joined the EU, Styria's GDP per head fell short of the EU15 average by 8%. This gap has been halved steadily until 2001. However, Styria's GDP still amounts to only 81% of Austria's GDP per head.

As far as employment is concerned, economic structure is (relatively) dominated by industry (33%) and agriculture (8-9%) while the service sector plays a relatively minor role (58%). Particular development potential is to be found in the technology sector and connected production and services. Services closely linked to business, however, still provide room for improvement.

Styria is distinctly segmented in topographical respect. The mountains impede accessibility and connections between sub-regions considerably. Therefore, significant

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Styria's agriculture is influenced by topography and small-scale enterprises. The majority of enterprises is cultivating less than 10 hectares (ha), 28% less than 5 ha. On the other hand, the number of enterprises cultivating more than 20 ha increased during the 1990s. In 1999, out of a total of 48 500 agricultural enterprises, 18 000 were mountain farms.

57% of Styria's area are covered by forests, including mountain forest. Forestry accounts for 20% of total agricultural and forestral production and is therefore indispensable for Styria's economic development.

Manufacturing industry was able to increase employment from 1997-2001. This was caused by investments above the national average which resulted in extension, modernisation and process innovation. This process of innovation, however, is by no means sufficient, as is indicated by a low share of new products in sales and below-average R&D activities. In general, the region is undergoing structural change from traditional to technology-oriented branches. In Graz, the companies Puch (100 years) and Steyr-Puch make for a long tradition of automobile and motor manufacturing. Many product innovations originated in this region (e.g. direct injection for Diesel engines, soot particle filters, 4-wheel drive). Furthermore, Daimler-Chrysler vans are manufactured here as well as all Daimler and BMW 4-wheel drive vehicles and special vehicles, e.g. for military purposes. Production amounts to about 100 000 vehicles per year.

In the service sector, a more satisfactory performance than in Austria as a whole could be noticed. More frequent occurrence of part-time work contributed to the favourable development of employment. Enterprise-oriented services (e.g. data processing) did not perform adequately for a long period; until two years ago, not even catching-up tendencies were noticable. Recently, a more favourable development occurred. Future potential in research and technology is evaluated positively. As far as tourism is concerned, some success has been made in sub-sectors as special and wellness tourism, while long-term potential is still looking well. Total overnight stays, however, decreased significantly in the 1993 to 1998 period (see table 20).

In the labour market, an overall trend towards increasing flexibilisation is noticable. As periods of unemployment are decreasing, the number of unemployed persons is increasing. The share of long-term unemployed persons fell to 5.5%. Youth unemployment, however, presents a more serious problem.

In 2001, the unemployment rate totalled 3.5% (by EU standards) - well below the EU level. If Austrian standards are applied, the unemployment rate is 6.5%.

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2.4 ENVIRONMENT

The region's natural assets include:

primarily, well-maintained forests. Cultivation is aggravated by inaccessible terrain the mountains and nature parks.

Styria's environmental situation is evaluated favourably. Problems include increasing traffic, area consumption, urban sprawl in agglomeration areas (southern Styria) and air quality during the winter. Emissions vary widely and depend heavily on the volume of traffic. There is a concentration of problems in shopping centres. Modal split regarding internal freight transport is estimated 13% rail and 87% road, passenger transport 20% and 80% respectively. Density of vehicles (number of motor vehicles per 1000 inhabitants) increased by 29% in the 1990 to 2001 period.

Styria is planning to establish a national park (Gesäuse) which will cover an area of 13.000 to 17.000 ha. Meanwhile, the fifth natural park has been established (Südsteirisches Weinland). Conflicts between forest and tourism are occurring.

The population's interest in the environment and its protection is immense and increasing. There are numerous environmental protection organisations and many citizens’ action groups which are not only pursuing their own interests but are acting from a perspective which focuses on the conservation of natural assets. This does not apply to the Graz agglomeration area only but to almost all sub-regions.

An initiative to demonstrate possible synergies between reduced resource consumption, reduced impact on the environment and companies’ cost cuttings was introduced rather early in Styria (Ökoprofit Graz).

There is an energy tax in Austria, which originates generally at energy production and aims at the inducement of increased energy efficiency. Moreover, there are contributions to the clean-up of former waste deposits and a regional tax regarding ballast digging which should reduce production and finance re-cultivation.

Calculation of a region’s environmental expenditures is a difficult exercise in a federal country. The consideration of federal and the regional government's contribution as well as municipalities' and individuals' is not feasible. The regular budget of the Styria region dedicated € 61.6 million (proportionally included in diverse items) and the irregular budget € 15.2 million.

2.5 MODEL OF DEVELOPMENT

Apparently, Styria’s government implicitly if not explicitly pursues a model of development along the lines of polarisation theory which results in concentration of regional potential and competence. This accounts for the fact that the prevalent small towns and municipalities have limited potential to develop minimum sizes for networks and clusters based on division of labour.

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Hence, the agglomeration area’s significance as the economically crucial sub-region is emphasised. Other sub-regions have to focus on agriculture, forestry, tourism and other niches of supply.

Tight co-operation with other European regions is being promoted by the Regional Internationalisation Strategy (RISt). This co-operation with Poland, Croatia and Serbia is funded by national means only.

3 MAIN UNION POLICIES

3.1 INTERNAL MARKET COMMUNITY POLICY AND REGIONAL DEVELOPMENT

In Styria, financial means derived from the projects EFRE, EAGFL, Leader, ESF and INTERREG are applied successfully. Also EU’s environmental legislation has had a significant impact. Last but not least, Austria’s accession to the EU and the challenges of the Common Market and the Common Currency resulted in changing attitudes and behaviour of economic protagonists. According to several interview partners, the accession caused a huge tug towards enhanced competitive strength throughout the country. The application of the region’s capital Graz for the position of European Cultural Capital and its success in 2003 may serve as a example for Styria’s European orientation.

3.2 CAP

In general, agricultural development is determined by the demands of European agricultural policy. Only ÖPUL allows some country specific leeway concerning agriculture. Austria introduced its own program aiming at environmentally sound, extensive and natural habitat-conserving agriculture which started as ÖPUL 95 and has been continued by ÖPUL 98 and ÖPUL 2000. ÖPUL is enjoying wide-spread acceptance among agricultural enterprises. In Styria, more than 25 000 enterprises are participating, 3000 of which have adopted the “Biological Way of Operation” and nearly 13 000 participating in “Preserving the Cultural Landscape”

Small sub-regions heavy dependency on single products (hop, tobacco) causes farmers’ dependency on purchasers. To stabilise the market, at times farmers have been subsidised by the regional government.

3.3 EU’S ENVIRONMENTAL POLICY

In Styria, EU’s environmental policy is perceived primarily as issuing of directives regarding environmental subjects. Programs equipped with financial instruments play a minor role, the exception being agricultural policy and its implications on the environment.

3.4 RESEARCH AND DEVELOPMENT

EU is promoting research and development projects proportionally. Yet, these means do not in all cases suffice to stimulate adequate activities. Principally, there is equal access to EU programs for all companies. Conditions for big companies with their own R&D

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3.5 PUBLIC AID

The above mentioned examples for public assistance are perceived as chosen arbitrarily. The second aid, however, concerns – in total – entire Austria. Public aid is embedded in the Guidelines for Economic Promotion and has been notified (investments, R&D). Styria’s economic promotion is receiving six measures, the majority of which is supported by the EU. Public aid for agriculture is channelled through the Ministry for Agriculture and has been notified as well.

Public aid is only applied for in important exceptional cases and reviewed critically by the EU. Without such assistance, the continuity of otherwise competitive enterprises or companies undergoing necessary stages of re-structuring would have been compromised.

4 ASSESSMENT OF THE IMPACT: MAIN RESULTS

EU assistance in general has resulted in an increased realisation of projects in necessary restructuring. On the other hand, increased support for these projects was facilitated. The Structure Funds period along with the planning of programs covering an extended period brought about a continuity in realisation regarding both financial means and the capacity for planning. Finally, this has had an impact on the balance of success.

According to some perceptions, political-cultural success is just as significant as impacts on technical policy. Positive impacts of EU assistance should not merely be measured in financial terms. Rather, an outstanding evaluation culture developed, moreover, co-operation and communication structures emerged and developed. Dealing with financial assistance became more conscious and efficient. Furthermore, many municipalities acquired an understanding of the region/sub-region due to a European perspective which had illuminated mutual dependencies and common interests.

4.1 AGRICULTURE

In Styria’s agriculture, a sound endogenous development has taken place. The EU accession activated substantial initiative, particularly of young farmers, especially as the phasing-out of compensation payments came into effect in 1997. There is specialisation, diversification and co-operation: Direct marketing, e.g. co-operative farm butcheries, holidays on the farm, winter tourism, IT in enterprise planning processes, activities in the energy sector (wood pellets, bio Diesel), brand creation in the production of wine, beef, pork, fruit, oil etc. along with mutual control of the production chain, services (loppings, landscape conservation, winter-, strewing and mowing services, social services, domestic care, machine circles). In agricultural colleges, the training in the tourism sector has been adjusted to the need for diversification.

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In recent 10 to 20 years, however, no substantial shifts in relative significance among agricultural products occurred. In fact, a general quality boost and therefore slight increase in prices present noticable tendencies.

The establishment of co-operation to enhance competitive strength and sales opportunities can draw on traditions which did not stand out quantitatively in the past but anchored the willingness to co-operate in agriculture mentally: fruit, vegetable and horticultural farmers did co-operate with their own brands at an early stage. Current efforts to introduce brands prove to be successful: Fruit, wine, vegetables, StyriaBeef (calves are kept on the meadow with the mother cow), StyriaBreed, Almo, core oil. Reasonable prices can be realised. The demonstration and traceability of the production chain plays an important role. This ensures quality and creates positive effects for farmers.

As a consequence of brand introduction, a means of quality assurance has been the substitution of import piglets by own-bred animals.

The following measures are considered most effective for adjustment of agriculture to changing general conditions:

investment measures promotion of co-operation and diversification.

Significant negative influence is blamed on the WTO regulations. Globalisation and liberalisation are perceived to promote non-sustainable agriculture, which was being demonstrated by hormone scandals and gen food production in the USA, in spite of the US subsidising agriculture even higher than the EU.

It is widely perceived as a drawback that the EU does not administer its own forestry policy. As about a fifth of Styria's agricultural production originates from forestry, there is a close link between agriculture and forestry which determines the farmers' conditions of existence. In this respect, an initiative to create a wood cluster has been implemented which manufactures good building wood and furniture from Styrian wood.

It has to be granted to the EU's assistance that structural change has been enforced and promoted which facilitated the catching-up with other regions in international competition.

4.2 INDUSTRY AND SERVICES

In the 1995 to 2001 period, the number of newly established enterprises soared (from 1768 in 1995 to 3681 in 2001). The balance of new establishments and closures - as well as the balance of growing and shrinking enterprises - is positive in both Styria and NUTS three- digit regions (see Table 15).

The same applies to the job balance (see Table 16). In total, 19 594 enterprises have been established in Styria in the 1995 to 2001 period.

The increase of highly qualified jobs has been disproportionally large in all sub-regions (see Table 7). Likewise, the total number of lowly qualified employees has been increasing from 1994 to 1998. This, however, does not apply to all sub-regions, the notable exception being the region's capital, Graz (see Table 8).

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The technology sector presents a core (cluster) of self-sustaining development. Unlike Austria's as a whole, the region's locational attractivity increased and caused the location of matching enterprises and respective structural change, even beyond the Graz central sub- region. The sectoral composition of employment development does not reflect this aspect to full extent, because many of the jobs in question would have been added to the rapidly expanding service sector (see Tables 17a to 17h and, as a reference, Table 17).

The promotion of modernisation and structural enhancement in existing enterprises has contributed to the safeguarding of jobs. More over, these enterprises' position - and that of SMEs in particular - has been strengthened.

As far as assistance is concerned, a shift from large projects (> € 360 000) to smaller ones (> € 75 000) occurred. This is generally approved, because influence can be exerted more widely. More and more, the emphasis is shifting to SMEs.

Regional promotion's positive incentives to increased research and development activities in Target 2 Areas are understood as another contributing factor to positive economic development. Thereby, the regional economy's susceptibility to crises has been reduced.

Research and development on the enterprise level is of increasing relevance for the Styria region due to its economic structure. In recent years, costs per project increased from € 107 000 in average in 1998 to 140 000 in average in 2003. The number of projects increased as well. This development can, at least partially, be attributed to regional promotion's positive incentives regarding increased research and development activities in Target 2 Areas. Financial assistance has contributed to a fundamental anchoring of the topic "increased research and development activities" in Styrian enterprises even beyond the central sub-region Graz and its surroundings.

At the same time, a shift from promotion on the enterprise level to promotion of infrastructure and regional competence can be noticed. This results in increased concentration on the greater Graz sub-region as an orientation point for activities which are characterised by high division of labour and elaborate networks and as a motor of Styria's economic development. The majority of supported projects, more than half of the financial means granted and of total investments in technology promotion concern the central sub- region Graz and its surroundings (see Table 18).

As large enterprises have easier access to R&D promotion than small and medium- sized enterprises, the state has lowered the threshold for SMEs by means of the so-called "Innovationsprofi" (innovation professional) which is co-financed by the EU. During the term of an R&D project, the enterprise can fall back upon external knowledge. No conclusion can be drawn as yet whether long-term R&D activities can be initiated in SMEs.

To assist R&D on the enterprise level, numerous competence centres have been established where university institutes are co-operating with enterprises. EU assistance, however, is limited to R&D projects and is not benefiting the competence centres as such.

Disagreement prevails within the region concerning large enterprises receiving financial assistance and not repaying it. According to one opinion, if enterprises are not going bankrupt, they tend to stay in the region. Generally, the Burgenland (Target 1) could not really compete with Styria due to its deficits as far as infrastructure and human capital is concerned. On the other hand, examples of companies re-locating enterprises by means of public aid have been mentioned. It has not been feasible to verify these statements.

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4.3 ENVIRONMENT

EU's environmental policy did not bring about substantial additional impact on environmental quality as European objectives had been realised generally on national initiative. On the contrary, EU's environmental policy resulted in increased bureaucratisation due to more extensive statistics and reporting duties. EU's Alps Convention, however, is regarded explicitly positive.

Impacts of environmental policy on waste management were noticable: Waste collected in municipalities amounts to 350 kg per year and head. In Styria, there are 12 mass dumps which provide for other Austrian regions as well. Per year, 515 000 t are deposited. EU's Deposit Regulation prescribes the depositing of pre-processed material only as early as 2004 (and not 2008) onwards. Therefore, the deposited amount is reduced to about one third or about 150 000 t to 200 000 t. Hence, capacities are abundant.

The Directive on Volatile Organic Compounds is considered counter-productive as it results in disproportionally high costs on part of many SMEs. For thousands of SMEs, minor emissions have to be accounted for and penalties have to be imposed for minor defaults. In this respect, the effective removal of major emittants should be given priority (realisation deficits in many European regions).

Besides impacts on environmental quality, impacts on the labour market have to be considered as well. In general, EU's environmental policy has had positive effects on employment (environmental technology, engines, sewage, waste, scrap recycling, consulting). This concerns technicians and environmental consultants primarily. National emission limits, however, do have negative impacts on employment because re-location of enterprises is foreseeable due to the accession of Eastern European countries maintaining lower standards and long transition periods which substantially exceed companies' investment cycles.

Moreover, suspicion prevails that other countries are gaining competitive advantages by neglecting to control the implemetation of directives seriously.

Employment-related impacts of EU directives include:

Sulphur in liquid fuel: There are no regional impacts. The ÖMV, however, is benefiting from Austria's vanguard role in this respect. National emission limits have negative effects on employment due to the re- location of enterprises to the Czechia and Hungary. It is expected that, due to transition periods and even after their expiry date inadequate realisation, production at lower standards and therefore lower costs can be maintained. The topic of major incinerators was concluded before and therefore did not bring about negative consequences. The Directive on Volatile Organic Compounds exerts negative influence, particularly on SMEs. Its observation causes disproportionally high costs, which do not really seem justified on technical grounds. SME's danger potential is significantly lower than that of large enterprises. There is a conflict of interests between environmental policy and competition law. The Directive is realised rather differently in EU countries. Municipal sewage has not been an item for some time. Hence, the according Directive did not have any impact.

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The Drinking Water Directive has had positive impacts on employment. Adjustments of equipment are required and therefore additional jobs in environmental technologies are created. The Nitrate problem has more or less been solved. Problems persist in two areas only where it is preferable not to maintain drinking water sources (vegetable production). But even there, the situation has improved considerably. Otherwise, drinking water provision is regulated and ensured in a small-space approach. Only in the country's south east, water shortage occurs infrequently in the summer. There is no special refuse incineration in Styria. Likewise, packing waste is no problem anymore. The Directive on Obsolete Vehicles has had a positive impact on employment, because there are rather competent scrap recycling enterprises which are equipped according to latest standards and receive higher quantities of scrap nowadays.

4.4 INTERNAL COHESION

Urban centres and rural areas are more or less complementary. Part-time farming is executed primarily in cities where sales markets for processing and retail are located as well. On the other hand, city dwellers visit the country side for purposes of leisure and recreation (holiday apartments and homes).

The development of rural areas focuses on infrastructural belts, primarily along roads. Positive impacts on agriculture derive from related manufacturing industry (leather, tinned food), tourism and services. To counteract concentration in manufacturing, farmers have established marketing co-operatives which can exert more substantial bargaining power.

Tourism and diversification at least partially decrease rural areas' dependency on adverse developments in the cities.

Smaller sub-regions depend heavily on single products (hop, tobacco), which aggravates dependency on purchasers. In order to stabilise the market, regional funds are disbursed to farmers.

Among favoured sub-regions, production and income tend to level out. Discrepancies between favoured and less-favoured areas, however, tend to become more and more severe.

Inevitably, increased promotion of the region's agglomeration areas, and of the Graz sub-region in particular, is accompanying the transition from promotion on the enterprise level to support of regional enterprise networks and competence centres. Therefore, intra- regional developmental discrepancies are going to increase while the catching-up with other European regions will decelerate.

Even now, land prices can serve as evidence for the tendency towards intra-regional polarisation. Prices for agricultural land in rural areas have plummeted (from €8-10 to € 4-5 per m²). Along the motorway, however, a m² sells for € 15 nowadays. Naturally, prices in general are rather heterogeneous depending on location.

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4.5 EXTERNAL COHESION

When Austria joined the EU, Styria's GDP fell short of EU15 average by 8%. Up to the year 2000, this gap was halved steadily.

This may prove the great success of recent policy and EU's assistance. However, today's requirements include not merely the continuation of this policy, but also the focus on Styria's enhanced connection within the EU. Neither rail nor motorway connections can be perceived as an adequate framework for future development.

5 COOORDINATION

Three EU General Directions, three Austrian Federal Ministries, three Regional Ministries and diverse subordinate administration units are concerned with EU's public aid to support Styria's development. Therefore, both the regional and the local level of administration face acute challenges regarding co-ordination of resources and administrative procedures.

Particular problems originate from dissimilar financial regulations concerning EFRE and ESF, from the slow start of programs and the introduction of regulations when programs are already approved. Furthermore, the demarcation of EAGFL-A and EFRE has been difficult at times. As far as connections of Community Initiatives to Structural Funds is concerned, different implementation of regulations occurred. Different accounting periods are reported to have been a problem as well. In general, vague regulations with wide leeway for interpretation present a problem, if hierarchical ways of decision making prevail in the actual case at hand.

Environmental politicians criticise EU regulation's not being tuned in to each other (e.g. refuse and waters). This fact causes additional conflicts and an abundance of reports dealing with the implementation of regulations. Lack of adjustment occurs even within one single General Direction. Co-ordination failure originates frequently from the EU level.

Co-ordination within the administration is assessed to be working well. On the regional level, one single institution co-ordinates EU aid including technical aid in dealings with the EU and is responsible for implementation of federal assistance as well. EAGFL-A and -G, however, are directed through another institution of the Ministry for Agriculture. Leader+ and INTERREG (one joint project with Slovenia and one environmental project in the Drau Basin) concern Department 16A (Interregional Planning). Therefore, despite positive assessment on a local level, fragmental horizontal co-ordination of financial means and assistance programs on the regional (Styrian Government) level can be noticed.

On the local level, seven agencies to enhance co-ordination with private protagonists were established. These agencies surpassed their original tasks and developed into regional co-ordination agencies. Vertically, co-ordination of protagonists is the responsibility of the Economic Promotion Organisation which keeps in touch with enterprises, deals with R&D on the enterprise level and maintains connections to scientific R&D institutions as well. Economic Promotion represents the operative element of the program.

There is no co-ordination of control of granted aid. Generally, every aid donor controls separately, which results in multiple controls and consequent inacceptance on part of recipients. Detailed control covering even bank statements cause immense expenses which

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FINAL REPORT (ANNEX I) are frequently disproportionally large compared with the amount of aid and counteracts the intended purpose of promotion instruments. In this respect, there is an urgent need for action.

6 GOVERNANCE ISSUES

While from 1996 to 1999 promotion of enterprises was increasing sharply (as well as in Austria as a whole), in 2000, new EU assistance programs caused a decline by more than 50%. This has been a consequence of EU assistance programs or individual guidelines not being approved or notified. 2001, considerable renewed increase of promotion cases occurred.

Such bureaucratic discontinuities impediments the effectivity of public aid in the medium and long run. Competition, economic processes and business demands do not make allowances for withdrawal of resources, even if only temporary.

Generally, the increasing bureaucratic burden on aid implementation caused by enforced rigidity of EU directions is criticised. This applies particularly as far as promotion on the enterprise level is concerned. Detailed control exerts prohibitive consequences on enterprises because of required expenses. Hence, potential assistance programs are dispensed with because expenses are expected to be huge and not calculable previously. This problem concerns especially small and medium-sized enterprises.

The consequent negative image enterprises maintain of the EU bureaucracy cannot be denied.

Participation of economic and social organisations and other protagonists is taking place primarily in program planning. In the Supervision Committee, strategic orientation is being discussed and modifications of the EPPD are decided. On the project level, regional management agencies are the most crucial hinges regarding local participation. Participation, however, suffers from a negative attitude towards the EU bureaucracy, which in some cases extends even to rejection of EU aid because the according expenses are seen as intolerable.

Parallel to regulations, an excellent evaluation culture developed in Styria, which resulted in more intense reflection of measures and increased efficiency of implementation of national and regional aid. Monitoring and accounting systems, as well as enhanced public relations, increase transparency and result in more conscious and efficient dealing with public aid. Furthermore, programs reinforced co-operation structures and -culture. Communication among protagonists was intensified significantly. This applies both in general and to communication and co-operation among municipalities in particular.

7 CONCLUSIONS

Austria's accession to the EU, the Common Market and the Common Currency did connect Styria more closely with other European regions. By means of EU aid, the economic backlog could be halved in a relatively short period.

As a consequence of EU accession and reinforced by the EU and the Austrian program ÖPUL, a development towards higher quality, diversification and intensified co-operation has

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FINAL REPORT (ANNEX I) taken place. Future potential is to be found in environmentally sound agriculture which cannot, however, grow and persist without subsidies given the prevalent conditions.

Lack of European forestry policy proved to be a drawback, for peripheral sub-regions in particular, due to the close link between Styria's agriculture and forestry. Hence, arduous conditions of cultivation in mountain forests cannot be compensated by higher market prices. In the long run, potential displacement from the market is looming which would cause loss of a substantial source of income, particularly in peripheral sub-regions, and environmental damage resulting from non-cultivation.

As far as industry and services are concerned, the reinforcement of technological potential has absolute priority. The great help ensuing from EU aid notwithstanding, several restrictions have to be mentioned. On the one hand, they result from lack of continuity caused by gaps in program switches not functioning smoothly. This potentially impediments research and development to a substantial degree. On the other hand, public aid regulations, ranging from application to control of implementation, cause immense expenses especially for small and medium-sized enterprises. Hence, net assistance frequently approaches zero.

In the technology promotion sector, division of labour and specialisation suggest increased promotion of compounds, networks competence centres etc. Contemporarily, self- sustaining institutions which execute constant initiative and co-ordination functions cannot be promoted by EU aid.

As far as environmental policy is concerned, Styria views itself ahead of the EU. Merely the Refuse Dump Regulation did cause acceleration of the development regarding refuse businesses. On the contrary, EU's environmental policy causes bureaucratisation which generates increased costs and new conflicts.

Styria's lead with respect to environmental policy causes positive impacts on competitiveness as other regions have to attempt catching-up on these developments. Increased significance of environmental technology promotes Styria's employment directly.

Long transition periods concerning EU's Eastern Expansion which delay implementation of EU standards are widely criticised, however. Re-location of enterprises and resulting loss of employment due to lower environmental costs are to be expected.

Undeniably, Styria's catching-up causes internal spatial polarisation among agglomeration areas (Graz, particularly) on the one hand and peripheral sub-regions on the other. Potentials of the latter include tourism and, particularly, environmentally sound agriculture, forestry and maintenance of natural resources. The mountains, however, do not merely present the special attraction of these areas, but cause special expenses as well: promotion of tourism demands assistance via enhanced development. Agriculture, forestry and environment require financial assistance as well. Hence, peripheral sub-regions are heavily dependent on assistance.

EU policy can increase its effectivity by enhanced co-ordination. As expenses and achievements are totally blown out of proportions, restriction of bureaucratic regulation would not merely reduce costs but alleviate implementation of intended policy.

Execution directives should be clear, simple and issued in time. Within and among EU's General Directions objectives, procedures and schedules should be subject to more intense co-ordination. Failure occurring on this level cannot or by enormous efforts only be compensated on the local level. Another type and co-ordination of control activities are of particular significance. Multiple controls and waste of resources tend to demotivate all participating protagonists.

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8 GUIDELINES FOR THE COMMUNITY ACTION

EU Eastern expansion will demand economically weak regions' catching-up with European development. Transition periods for the application of EU standards cause distortion of competition which rebound on other regions suffering from development backlogs. Therefore transition periods have to be brief and must not exceed investment cycles of enterprises.

From a cohesion viewpoint, additional requirements include reimbursement of environmental responsibilities in general and for agriculture in particular and the compensation for natural drawbacks of regions and sub-regions (e.g. mountains) via subsidies.

Promotion of enterprises which potentially re-locate once they received public aid appears less sensible than promotion of infrastructure which remains in the region and of regional compounds, networks, competence centres etc.

Diversification into the energy sector should be supported.

Forestry cannot be separated from agriculture and should be included in EU policy.

More explicit demarcation between single funds has been suggested, as well as clearer and more simple execution directives by the European Commission and better adjustment among General Directions. Probably, one single EU Fund would be able to end all problems concerning diverging schedules, regulations etc. Finally, unacceptable multiple controls and disproprtionality of bureaucratic expenses and realised yield should be terminated.

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BIBLIOGRAPHY

- Das Land Steiermark: Grüner Bericht Steiermark. Bericht über die Lage der Land- und Forstwirtschaft (zweijährlich)

- Das Land Steiermark: Wirtschaftsbericht Steiermark (jährlich)

- Das Land Steiermark: Ziel2, Projektbeispiele

- Das Land Steiermark: Ziel 2 Steiermark 200-2006, Einheitliches Programmplanungsdokument (EPPD) und Ergänzung zur Programmplanung (EzP)

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PORTUGAL:

REGION: ALGARVE

ELABORATION:

Authors: Miguel Lebre de Freitas, Francisco Torres, Marta Dias, Ricardo Silva.

From: GROUP OF ECONOMIC POLICY ANALYSIS, UNIVERSIDADE DE AVEIRO.

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF ALGARVE. PORTUGAL

EXECUTIVE SUMMARY

Introduction

Progress towards cohesion

In the last years, the Algarve economy has performed relatively well. The region has been able to converge to the country average in terms of per capita GDP and this progress touched both the coastal and the rural areas. The region is now better endowed in terms of infrastructures and ability to converge than one decade ago. Special attention is needed, however in two dimensions: human capital and environment protection.

Effect of Community Policies

The impulse provided by CPs in promoting economic cohesion is widely recognised. In general, intervention did not give rise to excessive distortions or dependency.

Structural Funds

Algarve has received large amounts of Structural Funds. The fund with more impact in the region is EFDR. Under EFRD, Algarve has benefited from a substantial improvement in basic infra-strictures. This had a positive impact on living standards and competitiveness. Despite being one of the European regions with lower level of human capital, EFS spending has been evolving at a slow pace. This failure should be a matter of concern in the formulation of future policy.

CAP

Since most Agriculture in Algarve is of the Mediterranean type, CAP supports are not as important as in other EU regions. Most of the aid is taking the form of investment subsidies, thus contributed to the modernisation of agriculture without giving rise to significant dependency. Contrary to other regions, in Algarve, CAP has not caused a significant move toward production patterns that are contrary to the comparative advantage.

Other Policies

In general, the implementation of Common Fisheries Policy has been positive to the sector. Rules have been adapted so as to avoid the decline in the fishing

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FINAL REPORT (ANNEX I) stocks, the fleet is now more modern and with better working and safety conditions than before and fishermen incomes have improved significantly. In general, the re- scaling of the fishing sector did not generate any important social effect.

Environment policies have received substantial support in the last years, mostly under EFRD and the Cohesion Fund. Despite the progress made, environment issues should be kept on the top of the policy agenda in the near future. The erosion of the coast, a final solution for solid urban residuals, interventions in the urban centres that have grown chaotically and the protection of natural areas are aspects that need urgent intervention.

Co-ordination between policies

During the programming phase of PROALGARVE, the policy debate was enriched by the participation of key actors in the region. After the operational programme was created however, the co-ordination effort lost impetus. In general, co-ordination between different levels of government (regional, national, municipalities) is perceived to be deficient. Specific co-ordination problems were identified at the launch of POLIS.

Governance

In Algarve, there is no regional government. The regional development programme is managed by CCR, which has neither executive power nor direct authority over the regional directions or the municipalities. This gives rise to significant accountability and governance problems.

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INDEX

1 METHODOLOGICAL ISSUES

2 CONTEXT AND BACKGROUND

3 MAIN COMMUNITY POLICIES 3.1 STRUCTURAL FUNDS 3.2 CAP 3.3 ENVIRONMENT 3.4 COMMON FISHERIES POLICY 3.5 STATE AIDS

4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO ECONOMIC AND SOCIAL COHESION IN THE REGION 4.1 ECONOMIC CONVERGENCE 4.2 THE IMPACT OF COMMUNITY POLICIES

5 CO-ORDINATION BETWEENN THE COMMUNITY POLICIES

6 GOVERNANCE ISSUES

7 CONCLUSIONS

8 GUIDELINES FOR COMMUNITY ACTION

APPENDIX

Cohesion Indicators

List of inteviewed key informants:

Reports Obtained

Index of tables

Table 1.2. Cohesion accounting Figure 1. Productivity and demographic trends

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1 METHODOLOGICAL ISSUES

The following analysis and subsequent conclusions are based on discussions with 10 key actors in the region. This includes government officials with responsibility for managing relevant Community Programmes as well as private associations and academics with relevant research experience.

The conclusions of this work are often limited by lack of comparability. Saying that "co-ordination between policies is low" is not the same as saying that "co-ordination in Algarve is lower than in the rest of the country". Unfortunately, the methodology adopted in this work does not allow us to overcome this problem.

Because of time constraints, the study does not examine in detail all community initiatives. It tries, however, to characterise the main policy framework and to assess its overall impact.

2 CONTEXT AND BACKGROUND

Algarve is a region with roughly 350.000 inhabitants. Tourism related activities (including hostage and real state) represent the bulk of economic activity. In 1998, the number of tourists entering in Algarve by Faro airport and Andaluzia exceeded 4.7 million. Agriculture and fishing represents roughly 8% of regional GVA and 10% of the employment. Manufacture production represents less than 5% of regional GVA. Because of tourism, most of the activity is located in the coastal area of the south (Campina).

3 MAIN COMMUNITY POLICIES

3.1 STRUCTURAL FUNDS

The region has received large amounts of Structural Funds, which are managed under a regional programme called PROALGARVE (PROA in CSF II). The fund with more impact in the region is EFRD. EFS has also an important role, but spending has evolved at a lower pace. The cohesion fund has been used mostly for environment issues. The region also receives direct support from community initiatives, such as INTERREG, PIC LEADER + and EQUAL.

3.2 CAP

Agriculture in Algarve is mostly of the Mediterranean type. Hence, CAP aids do not constitute a significant share of farmers’ income. Still, farmers in Algarve have benefited from a considerable investment supports. Sectors that received help include citrus production, horticulture and forestry. Under the CAP´second pillar, there has also been some investment in the development of rural areas and supports to production diversification. The bulk of CAP policy comes, however, from the first pillar.

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3.3 ENVIRONMENT

After decades of insufficient monitoring, environmental issues became central in the formulation of Algarve regional policy. A significant proportion of the territory is now subject to environmental protection, either under Reserva Ecológica Nacional, Natura 2000, or other protection shemes. Remarkably, the bulk of the Cohesion Fund received by the region under CSF II was allocated to environmental policies (improvements in the water supply, collection and draining of waste and urban residuals, etc).

3.4 COMMON FISHERIES POLICY

The Fisheries policy is defined at the national level. In the implementation, however, there are two levels. The measures accounted for in the national policy framework are called MARE. Those accounted for in PROALGARVE are called MARIS and include infrastructure development (EFRD) and quality improvement (FIFG).

3.5 STATE AIDS

Subsidies to private business are attributed at the national level. Some of these are however accounted for in the regional programme, PROALGARVE. These are: support to local small-scale investment (firms with less than 20 workers), Information society and PITER – Regional programme of tourism development. All these are co-financed by ERDF.

4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO ECONOMIC AND SOCIAL COHESION IN THE REGION

4.1 ECONOMIC CONVERGENCE

To access the impact of policy actions on competitiveness, one should abstract from demographic effects. In columns (2) and (3) of Table 1.2, the relative per capita GVA is break down into a demographic component (working age population divided by total population) and a policy induced component (GVA per working age person). In columns (4) and (5), the relative GVA per working age person is break down into GVA per worker and the employment rate (employment divided by working age population).

Figure 1 displays the same information depicted in columns (2) and (3) of Table 1.2, but in changes, from 1990 to 2001. The y-axis measures the difference between the growth rates of GVA per working age person in each region and the country average. The horizontal axes measures the difference between the demographic trend of each region and the country average. The dashed line shows the combinations of demographic trends and productivity changes that would allow regional per capita GVA to grow proportionally to the country average. The graph defines four different zones, according to the relative performance of the different regions vis-à-vis the country average.

The figures reveal that Algarve enjoyed both a favourable demography and a fast rise in productivity. This twin advantage translated into a fast convergence towards the country average of per capita GDP.

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Table 1.2. Cohesion accounting (Portugal=1.00)

Of which:

Of which:

Working Age

Per capita Population GVA per

GVA divided by working age

GVA per

Employment rate Total person

worker

Population

(1) (2) (3)

(4) (5)

Norte

1990 0.80 1.01 0.79

0.80 0.99

2001 0.84 1.01 0.84 0.86 0.98

Centro

1990 0.82 0.96 0.86

0.79 1.08 2001 0.78 0.98 0.80

0.81 1.00

Lisboa e V.do Tejo

1990 1.37 1.04 1.32

1.32 1.00

2001 1.35 1.02 1.32

1.25 1.05

Alentejo

1990 0.80 0.92 0.86

1.00 0.87

2001 0.75 0.92 0.82 0.89 0.92

Algarve

1990 0.86 0.97 0.89

0.79 1.13

2001 0.95 0.99 0.95

1.00 0.96 Acores

1990 0.79 0.92 0.87 1.01 0.85

2001 0.71 0.96 0.74

0.85 0.86

Madeira

1990 0.96 0.96 1.00

1.19 0.84

2001 0.94 1.00 0.94 1.00 0.94

Notes: (1)=(2)*(3). (3)=(4)*(5). Source: DGREGIO, June 2003.

Figure 1. Productivity and demographic trends

10.00

Algarve Norte 5.00

Lisboa e Vale do Tejo 0.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00

-5.00Alentejo Centro Madeira Productivity Trends -10.00 (diffs relative to the country average)

-15.00 Açores Change in GVA per working age person, 1990-2001

-20.00 Demographic Trends Change in the ratio "Working age Population to Total Population" 1990-2001 (diffs relative to the country average)

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4.2 THE IMPACT OF COMMUNITY POLICIES

4.2.1 Structural Funds

The fund with more impact in the region is EFDR. EFDR has been used to improve public infrastructures, such as roads, hospitals, water supply, drainage of urban residuals, etc. With no question access to EFRD funding has improved significantly the living conditions in both rural and urban areas. Although most funds are spent in the coastal area (Campina), this is also the region where most of the population leaves. In proportion of the residential population, the understanding is that investments have been higher in rural areas.

Under EFRD, Algarve has benefited from a substantial improvement in accessibilities (roads, motorways and the airport). In response, the flow of tourists into the region increased significantly. For example, tourists entering by the Spanish border and the airport increased from 2.1 millions in 1990 to 4.7 million in 1998.

The improvement in municipal roads, reducing time distances, also helped people living in the countryside to share the benefits of economic development. People are now able to live in the rural areas of Barrocal and Serra and work in the coast (Campina).

The railroad is now connecting directly Faro to Lisbon. This allows travellers to move from the North of Portugal to the South without changing train. There is a perception, however, that the investment effort made in the regional railways system was too little. Since the railroad connects the main cities in Algarve, its improvement could have a positive impact on the labour mobility and on the traffic conditions in the main urban centres.

The National Employment Plan (NEP), in operation since 1999, is the basic set-up for employment policies in Portugal. The NEP was designed according to the EC guidelines and targets. The implementation of NEP in Algarve is undertaken by three different structures (Redes Nacionais de Emprego). This is however only for operational purposes: there is no regional autonomy in the policy formulation.

In Algarve, the labour market is significantly affected by seasonality. Since most demand for labour comes in the summer, much of the employment created is short-term. A significant share of the workforce engages in summer work, enjoying high monthly wages and benefiting from unemployment protection during the winter. The authorities tried to reduce this phenomenon, supporting longer-term employment with training actions during the winter. However, only the larger firms (those that usually hire long-term) have responded. Small firms (the target of the policy) are insisting in hiring only short-term workers.

The Instituto de Emprego e Formação Profissional has been surveying the employers, with the aim to identify training opportunities, rather than to offer courses according to the jobless requirements. The results so far have been promising. It was reported, however, that some unemployed, after receiving appropriate training, were unable to take jobs outside their residential areas because of lack of an appropriate public transport system.

ESF spending, because it depends on private bids, is highly concentrated in the more polarised regions of Campina. To offset this, attempts are being made by the national and regional authorities so as to promote specific training actions in the less favourable regions of Barrocal and Serra.

EFS spending is evolving at a slow pace. Although the seasonal nature of the labour market may explain this, it may also reflect a cultural problem. Remarkably, training actions

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FINAL REPORT (ANNEX I) specifically directed to the municipalities' own staff (accounted for in PROALGARVE) are revealing very low spending as well. This pattern, in a region with such a low level of human capital should be a matter of concern in the future policy formulation.

4.2.2 CAP

In Algarve there are some important cultures like citrus and horticulture. Forestry (pinewood, cork, eucalyptus) has also a significant role. The traditional cultures (almonds, figs and carobs), are not so dynamic, but have a high social value.

Since most Agriculture in Algarve is of the Mediterranean type, CAP supports are not as important as in other regions. Most of the aid comes through investment supports, thus contributing to the modernisation of agriculture without giving rise to significant dependency.

Contrary to other regions, in Algarve, CAP has not caused a significant move toward production patterns that are contrary to the comparative advantage. Milk production has practically disappeared and the production of cereals is declining every year. In this framework, de-linkage of supports from production is not likely to cause any significant change.

Of course, to the extent that the CAP' first pillar promotes extensive production, it has a detrimental impact on the environment. In Algarve, some contamination of water sources is likely to be caused by extensive horticulture.

Some research projects undertaken in Algarve are related to agriculture. The most significant involve the Regional Direction of Agriculture, the University of Algarve and, in some cases, Spanish entities (under INTERREG).

The CAP policy is administrated in the region at two different levels. The bulk of the CAP policy is under the national framework, named AGRO. Pillar II policies, because they are more linked to the region, were incorporated in PROALGARVE, under the name AGRIS. This includes rural development, diversification, incentives to workmanship, urban interventions in small villages, support to small-scale production, quality development, environment protection, etc. From the cohesion point of view, this dimension of the CAP is of great importance.

Important from the social point of view are small-scale production of agriculture derivatives, such as cheese, liqueurs and olives. Although special supporting programmes were designed for these activities, eligibility requires producers to satisfy a heavy set of consumer protection rules. It has been reported that many small-scale producers prefer to remain in the shadow, not satisfying the requirements (and in some cases not paying taxes), rather than to benefit from CAP pillar II aids.

Biologic agriculture and agro-tourism have not yet reach a visible scale in Algarve.

4.2.3 Common Fisheries Policy

From 1994 to 1999, the number of registered fisherman has declined from 8.200 to 6.800. The same trend is foreseen until 2008. The number of ships has also declined, from 2.900 to 2.300. The fleet is now more modern and with better working and safety conditions than before. In this process, there has been a tendency for the ships’ fishing capacity to increase. Despite these developments, 30% to 40% of the fleet is still obsolete.

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In general, the implementation of CFP has been positive to the sector. Fishermen incomes have improved and the re-scaling of the fishing sector has not caused important social effects. Earlier retirements were well accepted and transfers of workers to other sectors were smooth. However, a problem of false retirements has been identified: because pensions are very low, some retired fishermen are keeping a fishing activity, under the umbrella of "sport fishery". In Algarve, sport fishery is not being subject to adequate supervision.

Some fishermen in Algarve were affected by the failure of EU negotiations with Morocco. Those that were forced to stopped activity have been supported by different mechanisms in the last few years, but are now facing the threat of an earlier retirement.

The reduction of the exclusive fishing area to 12 miles is a matter of great concern among fisherman in Algarve. This is because most of the fishing activity takes place between the coast and the 20 miles. Fishermen are claiming that the Portuguese government has discriminated against them. In particular, they claim that licensing of ships in Portugal obeys to stricter rules than in Spain, giving rise to an unfair competition in terms of fishing capacity.

As other national policies, the Fisheries Policy was split into a regional dimension (MARIS) and a national dimension (MARES). In practice, however, all policy is mediated through the national government. Since the regional director of fisheries has no autonomy, de-centralisation is only virtual.

4.2.4 Environmental Policies

Environment policies have received substantial Community support in the last years, mostly through EFRD and the Cohesion Fund. For example, water supply and treatments of urban residuals were areas of intervention. The policy was conduced by the Regional Direction of Environment. This body has also been involved in the evaluation of the environmental impact of projects that are not usually subject to such requirement by the EC (small roads, for example).

Despite the progress made, environment issues should be kept on the top of the policy agenda in the future. The erosion of the coast, a final solution for solid urban residuals, interventions in the urban centres that have grown chaotically, protection of natural areas are aspects that need urgent intervention.

After decades of negligence, there is now an understanding that environmental protection is crucial for sustained development, particularly in a region where tourism plays such a special role. Those urban areas that have grown chaotically in the past are now loosing competitiveness to alternative areas where planning and environment protection are accounted for. This process of "flight to quality" is not enough, however, as a disciplinary device. Because of the externalities involved, individual decisions tend not to incorporate the social losses, giving rise to excess building and environment problems. Given the extreme sensitivity of the region and the economic interests involved, a strict ruling system is required.

In some cities, the deterioration of living condition is proceeding (excess building, lack of green areas). POLIS is a national initiative aiming the re-qualification of distressed urban centres. The first wave of projects is taking place in Albufeira and Silves. An extension of the POLIS program to other municipalities would be of great interest for the region.

The situation has gone differently in the countryside. Up to the 1980s, housing construction has lead to a fast deterioration of the rural paysage. In 1990, PROTAL - Plano

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In the areas of special protection (Ria Formosa, Costa Vicentina, Guadiana), the Instituto de Conservação da Natureza has managed to avoid a further deterioration of the environment conditions.

5 CO-ORDINATION BETWEENN THE COMMUNITY POLICIES

Previous to elaboration of PROALGARVE, a strategic document was prepared, containing the main policy options for the region. The preceding discussions involved directly key actors in the region, such as the CCR - Comissão de Coordenação Regional, the regional directions representing the national government (agriculture, economy, employment, etc), the municipalities (AMAL - Associação de Municípios, representing the 17 municipalities of Algarve), business associations, academics, the Comissão Regional de Turismo (where both the central government and the municipalities are represented). This debate allowed key actors and government officials in the region to take contact with the problems identified by each other and to incorporate solutions in the new programme.

In PROALGARVE, two main innovations in respect to PROA were introduced:

In order to avoid the more dynamic areas to absorb the bulk of the financial resources, a special dimension in PROALGARVE was created, called “Territorial Actions”. Territorial actions were introduced so as to promote a more balanced development over the territory, taking into account the two different dimensions: a coastal area subject to urban pressures (Campina) and the rural periphery (Barrocal and Serra). Although expenditures in territorial actions are evolving at a slower pace than planned, since resources cannot be re-allocated between actions, authorities trust this mechanism to be an effective cohesion tool.

De-centralisation: attempt to incorporate into the regional plan some spending from the national policy. For example, the agriculture policy was split into AGRIS (regional) and AGRO (national). The fisheries policy was split into MARE (nacional) and MARIS (regional). For the employment policy, the split between policies is less obvious: initiatives for unemployed are under PROALGARVE, while initiatives for youth and job-training actions are kept as a national policy.

In practice, although some "national" policies are accounted for in PROALGARVE, the actual procedures and the decision process obey to the same rules as for those policies that remain under the national umbrella. In Agriculture, for example, AGRIS rules are equal in all Portuguese regions and the final decision is given to the Ministry. This means that, from the co-ordination point of view, the incorporation of national policies in PROALGARVE is little more than an accounting change.

Specific co-ordination problems were identified at the launch of POLIS. This initiative was to be co-financed both by the Portuguese Government and European Funds (Cohesion Fund, Sectoral Operational Programs). The policy was however formulated after the III Community Framework was on its way. Since the selection and eligibility criteria of POLIS had not been subject to the scrutiny of the EC, some negotiations had to occur. This lead to a significant delay. Three years after the initiative was announced, no physical interventions have yet take place.

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Rural development, electrification of isolated areas, promotion of small-scale activities in areas with low density (cheese, liqueurs, olives, workmanship) involve different funds, such as EFRD, CAP/AGRIS, and LEADER. Co-ordination between these initiatives was referred to be low.

6 GOVERNANCE ISSUES

During the second CSF, Algarve revealed a low spending capability, as compared to the rest of the country. This was not so much a problem of regional governance (actually, funds depending on the regional plan were spend at a normal pace), but rather a difficulty of the regional directions to drive resources into the region. Since these "national policies" represent the bulk of the budget, PROALGARVE attempted to solve this problem incorporating in the regional plan some "national" policies (de-centralisation).

PROALGARVE is managed by CCR, which has neither executive power nor direct authority over those that have the executive power, the regional directions and municipalities. Regional directions respond vertically to the national government. Municipalities have their own political legitimacy. This rises problems of acountability and tranlates into an excess weight of municipalities in the decision-making process. Perhaps this explains the excess of symbolic infrastructure and some lack of scale in the policy formulation.

Under INTERREG, cross-border partnerships involving bodies from Algarve, Andaluzia and Alentejo have been supported. In the current framework, the eligibility requirements are stricter than under CSF II: only effectively integrated projects are being supported. Two problems were identified in the implementation of this program. The first is that, contrary to what happens in Spain, in Portugal there are no regional governments. This means that, in some matters, the dialog is between the authorities in Andaluzia and the Portuguese government. On the other hand, some communications problems may have result from the fact that Andaluzia is economically much larger than Algarve. Notwithstanding, roughly 50 projects supported by INTERREG III are underway.

It was reported that projects submitted to PROALGARVE have a faster approval than those supported by national policies.

7 CONCLUSIONS

With no question, in Algarve, CPs have played a crucial role in promoting economic cohesion. Public infrastructures, such as accessibilities, water supply, drainage of urban residuals, have been the main vehicles. A greater attention should be given, however, to public transportation and in particular to the railway system, which needs modernisation. Despite being one of the regions in Europe with lower level of human capital, in Algarve EFS spending has evolved at a slow pace. Contrary to other regions, in Algarve CAP is not leading to significant distortions.

Environmental problems caused by deficient of planning and excess building construction are a main concern in Algarve. Although stricter rules are now in place, economic pressures are very strong. A co-ordinated intervention, involving different actors

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FINAL REPORT (ANNEX I) and ministries would be of interest, so as to avoid a further damage on the competitiveness of the territory.

In the last CSF, an effort was made to de-centralise some policies. This effort gave rise to the formulation of a strategic plan in which many key actors have intervened, enriching the debate. In the implementation phase, however, governance problems related to the absence of a regional authority have emerged. National policies, even when accounted for in PROALGARVE, are subject to government approval and the programme manager has little influence in the decision process.

8 GUIDELINES FOR COMMUNITY ACTION

- Strict environment protection

- Strengthening the effectiveness of training actions: market orientation rather than orientation according to the jobless preferences.

- Support to the re-qualification of urban areas.

- Reinforce the authority of the CCR.

- Improvements in the railways system

- Stricter control over fishing.

- Reduce the official incentives to seasonal unemployment.

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APPENDIX

Cohesion Indicators

Indicators obtained for Algarve are listed in the table below - see attached files for detail.

Demographic Migration Balance 1990-1999 Child mortality rate 1990-1999 Aging Index1 1991-1999 (excluding 1992) Economic Regional GDP per head (PPS) 1991/95/00/01 Regional GVA per working age population [15 - 64 years old] 1990-2001 Regional GVA per worker 1990-2001 R&D employment as a % of the regional workforce (Full Time 1990/92/95/97/99 Equivalent per unit of labour force) Gross Expenditure in R&D as percentage of regional GDP, by 1995/97/99 performing sector (Business, Government, Higher education and Public non Profit Institutions) Employment Rate 1990-2001 Participation rate 1990-2001 Employment Growth Rate 1990-2001 Poverty & social exclusion Unemployment 1994-2001 Benefit Claimants (Incapacity and Disablement) as percentage 1994/96/98 of total labor force (Disablement and survival and Oldness) EducDemographication Students Registered as percentage of the relevant population 1987/88-1989/90 group (Higher School) and 1991/92-1997/1998 Environment Energy Consumption in KWh per consumer 1994-2001 Population Covering Rate (Treatment of Residual Waters, 1981/90/97/99 Collection of Urban Solid Residuals and Treatment of Solid Urban Residuals) Agriculture

Percentage of regional GVA derived from agriculture 1990-2001 Growth Rate of GVA per worker in agriculture 1990-2001 Percentage of regional employment in agriculture 1990-2001

1-Population aged over 65 diveded by population aged less then 15

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List of inteviewed key informants:

Hora Instituição Pessoa a contactar Cargo Telefone Morada 29-jul 9h30 Universidade do Prof. António Covas Professor (EU FEUA - Campus de Algarve issues) Gambelas, 8005-139 Faro 11h00 Universidade do Prof. João Albino Professor FEUA - Campus de Algarve Silva (tourism) Gambelas, 8005-139 Faro 12h00 Região de Turismo Dr José Dias Vogal 2,9E+08 Av. 5 de Outubro 18- do Algarve 20, 8000-076 Faro 14h00 Plano Regional Dra Fátima Quirino Directora 2,9E+08 Av. 5 de Outubro 18- Turismo Algarve 20, 8000-076 Faro 16h30 Organização António Branca Presidente 2,9E+08 Av. 16 de Junho, Olhão Pescas Algarve (Antigas Instalações da Lota) 30-jul 9h30 C. M. Albufeira Dr. Rolo Vice-Presidente 2,9E+08 R. Município, 8200 Albufeira 11h30 D. Regional de Dr. Hélder Correia Director 2,9E+08 Av. 16 de Julho, Edif. Pescas e JATSA Apart.117, 8700 Aquicultura do Sul Olhão 16h00 CCR-Algarve Drª. Filomena Chefe do 2,9E+08 Praça da Liberdade Coelho, Projecto nº.2, 8000-164 Faro proalgarve@ccr- PROALGARVE alg.pt 01-ago 10h30 Dir Regional da Dr Ezequiel Pinho 2,9E+08 Patacão Agricultura 14h30 Inst. Emprego e Dra Fernanda Santos Sub-delegada R. Candido Guerreiro Form. Prodissional nacional

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Reports Obtained

“Algarve 2000-2006: O Algarve em números”, Comissão de Coordenação da Região do Algarve, Dezembro 2000.

“Algarve 2000-2006: Programa Operacional do Algarve”, Comissão de Coordenação da Região do Algarve, Dezembro 2001.

“Algarve 2000-2006: Um retrato do Algarve na Viragem do Século”, Comissão de Coordenação da Região do Algarve, Dezembro 2000.

“Algarve 2000-2006: Estratégia de Desenvolvimento do Algarve”, Comissão de Coordenação da Região do Algarve, Dezembro 2000.

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PORTUGAL:

REGION: AÇORES

ELABORATION:

Authors: Miguel Lebre de Freitas, Francisco Torres, Marta Dias, Ricardo Silva.

From: GROUP OF ECONOMIC POLICY ANALYSIS, UNIVERSIDADE DE AVEIRO.

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF AÇORES. PORTUGAL

EXECUTIVE SUMMARY

PROGRESS TOWARDS COHESION

With no question, the large subsidies received by the economy of Azores in the last 5 years have impacted on economic growth. The living conditions of the resident population has increased and the benefits of this growth surge were well spread among the population.

In general, the cohesion fund and structural funds (EFRD, EFS) have played a major role in promoting competitiveness.

The administration of some funds has been, however, rather inefficient. The economy is not only highly dependent on the amount of external transfers, but it is also affected by wrong incentives. A policy shift towards the market would be desirable, to promote competitiveness and self-sustained development. A greater discrimination in intervention and "getting the prices right" are necessary steps to achieve better efficiency and a pattern of production more in shape with the comparative advantages.

Revising the existing incentives does not mean that the region should receive less financial support. Because of its geographical conditions, it is important for Azores to keep receiving substantial aids. However, a progress towards less distortions in the administration of the funds would be advisable.

EFFECT OF COMMUNITY POLICIES

Structural Funds

EFRD funding has been of major importance for the region. By helping the provision of essential infra-structures, this policy has contributed to increase the competitiveness of the territory. The same with the Cohesion Fund.

The ESF has a lower financial expression than EFRD, but its impact on competitiveness should not be underestimated. Unfortunately, the ESF budget in Azores is not proportional to the existing needs.

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CAP

Unlike other regions, in Azores CAP plays an important role in social cohesion. Without CAP aids, Azores would suffer a dramatic economic and social problem.

As far as economic cohesion is concerned, however, the policy is rather ineffective: it creates dependency, it gives rise to significant distortions in resource allocation and it has raised significant environmental problems.

Other Policies

Because of its insularity, the region benefits from a wide range of investment supporting packages, like SIDEP. With these instruments, the regional government is able to help firms operating virtually in any sector. The use of this ability has lead to significant distortions.

COORDINATION BETWEEN POLICIES

In general, co-ordination between different levels of government (regional, national, municipalities) is perceived to be deficient by different actors.

GOVERNANCE

In general, CPs have contributed to improve the planning and management capabilities of the administration.

The existence of a regional government constitutes and advantage in respect to other Portuguese regions. However, the structure of the administration is not perceived to be fully efficient.

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INDEX

1 METHODOLOGICAL ISSUES

2 CONTEXT AND BACKGROUND

3 MAIN COMMUNITY POLICIES 3.1 STRUCTURAL FUNDS 3.2 CAP 3.3 STATE AIDS 3.4 ENVIRONMENT 3.5 INNOVATION AND RESEARCH AND DEVELOPMENT

4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO ECONOMIC AND SOCIAL COHESION IN THE REGION 4.1 ECONOMIC CONVERGENCE 4.2 THE IMPACT OF COMMUNITY POLICIES

5 COORDINATION BETWEEN THE COMMUNITY POLICIES

6 GOVERNANCE ISSUES

7 CONCLUSIONS

8 GUIDELINES FOR COMMUNITY ACTION

APPENDIX

Cohesion Indicators

List of inteviewed key informants:

Reports Obtained

Index of tables

Table 1.2. Cohesion accounting Figure 1.3. Productivity and demographic trends

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1 METHODOLOGICAL ISSUES

The analysis and subsequent conclusions are based on discussions with 7 key actors in the region. This includes government officials with responsibility for managing relevant Community Programmes, as well as private associations and academics with relevant research experience.

In some cases, the conclusions are limited by lack of comparability. Saying that "co- ordination is low" is not the same as saying that "co-ordination in Azores is lower than in the rest of the country".

2 CONTEXT AND BACKGROUND

Azores is one of the poorer regions of the EU. The economic potential of Azores is largely affected by its location. The territory is located in the middle of the Atlantic Ocean. This results in high transport costs, that affect competitiveness.

Because the territory is composed by 9 islands, spread over an area of 66k square kilometres, the domestic market is fragmented. The resident population in some islands is too small to allow for local monopolistic behaviour. Lack of economies of scale also limits the ability to take profit of self-financed basic infra-structures, such as hospitals, roads, courts and schools. For this reason, this region has been recipient of considerable transfers from the rest of the country.

The economy of the archipelago is largely dependent on the public administration and on the flow of official (and also private) transfers. The bulk of regional GDP is accounted for by non-tradables, such as government services (public administration., schools, hospitals, courts, which are present in every island), housing construction, commerce, health care, etc). The most important tradable good being produced in the region is milk. This is a direct consequence of the CAP policy. The sector of tourism has been designated as a key sector for the development of the Archipelago and, in consequence, it has received a significant official impulse. However, the flow of tourists into the region is still too low to meet the region financial needs. Fishing had a significant weight in the past, but is now of declining importance.

The economy of Azores was mostly affected by the 1989 revision of the contract with the US for the use of the Lages military base. With this revision, the US government stopped paying a rent to the regional government. This was not compensated by a corresponding transfer from the national government. Facing a fall in revenues, the regional government accumulated arrears to the rest of the economy, causing a general liquidity problem and a recession. Between 1989 and 1996 the economy of Azores engaged in a divergent path. In 1998 a new financial regime was created for the autonomous regions Madeira and Azores. Official transfers, including a newly created cohesion fund, raised significantly. Under the new financial framework, the economy meet a new period of economic grow and convergence.

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3 MAIN COMMUNITY POLICIES

3.1 STRUCTURAL FUNDS

Azores has benefit from substantial amounts of Structural Funds (under the II CSF, it was a recipient of 45.372 thousands euros up to the end of 1999). The Region has been designated extreme-peripheral, since 1994. This status allows the region to be considered as objective 1, irrespectively of its per capita income level. In any case, since per capita GDP in Azores is below the 75% of EU average, the region would be ellected for objective 1, anyaway.

The main development plan in Azores is the PRODESA, co-financed by the regional government and by structural funds. The plan integrates a significant part of the available structural funds in the region. It covers the building of public infra-infrastructures, the shaping of the public administration and supports to the private sector. Other relevant community programmes include: REGIS, POSEIMA, INTERREG, LEADER.

3.2 CAP

In Azores, CAP has been the dominant source of EU funding. Because of its climacteric conditions, along the 1990s, the regions was induced to engage in cattle creation. Along this process, a regional cluster developed. As it is, CAPs is a more effective tool for social cohesion than a competitiveness enhancing policy.

3.3 STATE AIDS

The EC approved a special aid programme for the regional development of Azores (SIDER). Under this initiative, the range of eligible activities is unusually large.

3.4 ENVIRONMENT

The region has benefited from considerable EFRD support to improve the water supply, draining and collection of urban residuals and waste. Environmental protection rules are well accepted in the region.

3.5 INNOVATION AND RESEARCH AND DEVELOPMENT

Innovation Policies are not very significant in Azores. A notable exception is the research undertaken to explore the geothermal energy. A central was created in S. Miguel, with EFRD co-financing. In general, innovation policy is perceived as having a ‘broadly neutral’ effect.

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4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO ECONOMIC AND SOCIAL COHESION IN THE REGION

4.1 ECONOMIC CONVERGENCE

To access the impact of policy actions on competitiveness, one should abstract from demographic effects. In columns (2) and (3) of Table 1.2, the relative per capita GVA is break down into a demographic component (working age population divided by total population) and a policy induced component (GVA per working age person). In Columns (4) and (5), the relative GVA per working age person is break down into GVA per worker and the employment rate. Figure 1 displays the same information depicted in columns (2) and (3) of Table 1.2, but in changes, from 1990 to 2001.

The y-axis measures the difference between the regional growth rates of GVA per working age person and the country average. The horizontal axes measures the difference between the regional demographic trend and country average. The dashed line shows the combinations of demographic trends and productivity changes that would allow per capita GVA to grow proportionally to the country average. The graph defines four different regions, according to the relative performance of regions vis-à-vis the country average.

The figures reveal that Açores enjoyed a favourable demography, but their productivity levels diverged from the country average. Since the second effect dominated the first, the economy diverged in terms of per capita GVA, from 79% of the country average in 1990 to 71% in 2001.

Growth in Azores has been polarised: universities, training centres are in the three main urban centres: Ponta Delgada, Angra and Horta. Because of agglomeration effects and network economies, there is a natural tendency for regional imbalances to increase. The policy has tried to offset this tendency. There has always been a concern to provide each island with basic infrastructures, such as hospitals, schools, public administration, airports, ports. This effort leads to a dramatic loss of economies of scale.

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Table 1.2. Cohesion accounting (Portugal=1.00)

Of which:

Of which:

Working Age

Per capita Population GVA per

GVA divided by working age
GVA per

Employment rate Total person
worker

Population

(1) (2) (3)
(4) (5)

Norte
1990 0.80 1.01 0.79
0.80 0.99

2001 0.84 1.01 0.84 0.86 0.98

Centro

1990 0.82 0.96 0.86
0.79 1.08 2001 0.78 0.98 0.80
0.81 1.00

Lisboa e V.do Tejo

1990 1.37 1.04 1.32
1.32 1.00

2001 1.35 1.02 1.32
1.25 1.05

Alentejo
1990 0.80 0.92 0.86
1.00 0.87

2001 0.75 0.92 0.82 0.89 0.92

Algarve

1990 0.86 0.97 0.89
0.79 1.13

2001 0.95 0.99 0.95
1.00 0.96 Acores

1990 0.79 0.92 0.87 1.01 0.85

2001 0.71 0.96 0.74
0.85 0.86

Madeira
1990 0.96 0.96 1.00
1.19 0.84

2001 0.94 1.00 0.94 1.00 0.94

Notes: (1)=(2)*(3). (3)=(4)*(5). Source: DGREGIO, June 2003.

Figure 1.3. Productivity and demographic trends

10.00

Algarve Norte 5.00

Lisboa e Vale do Tejo 0.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00

-5.00Alentejo Centro Madeira Productivity Trends -10.00 (diffs relative to the country average)

-15.00 Açores Change in GVA per working age person, 1990-2001

-20.00 Demographic Trends Change in the ratio "Working age Population to Total Population" 1990-2001 (diffs relative to the country average)

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4.2 THE IMPACT OF COMMUNITY POLICIES

There is a general perceptions that CPs have contributed to improve the citizens quality of life in Azores.

There is, however, a disagreement as far as the impact of some policies on competitiveness is concerned.

4.2.1 Structural Funds and Cohesion Fund

EFRD is a quite visible policy, at it has contributed to improve the quality of the infrastructures in the territory. Thanks to significant investments in infra-structures, such as roads, airports and, to a less extent, arbours, mobility within the region and into the region has increased significantly. The development of Airport infrastructures was fundamental in this process. This, in turn, created new opportunities, namely in the sector of tourism.

Improvements in hospitals, schools, water supply, drainage of urban residuals also had a considerable impact on living conditions of the citizens, specially outside the main urban centres. The effort to spread the infra-structures over all the territory has lead, however, to loss of economies of scale.

Azores is the European region with lower education level. Despite this, the amount of ESF allocated to Azores is very low, as compared to the other Portuguese regions. The regional government is now promoting market oriented training actions: a survey was conduced, so as to detect the market needs. More than 90% of the firms in all over Azores have responded. Training actions are now following the directions identified in this survey. Professional Schools are now available in every island. Training courses are only approved if they meet the local needs. So far, the existing indications suggest that this change in policy has been a success. However, there are some reported cases of people that, after specific training, are not able to take jobs because of lack of an efficient transport system.

As in other regions in Portugal, the policy has been less generous as far as urban transports is concerned. Insufficient support to this industry is giving rise to imbalances in the labour market, special in the minimum wage segment, where people do not afford to buy a car.

With no question, investment in human capital is of crucial importance in Azores. An opportunity exist in that population in Azores is very young. More than 50k students are registered in school, representing 1/3 of the current working age population. In the next 12 years, this will impact significantly in the structure of the labour force. If the authorities are well succeeded in educating the younger people, the competitiveness of the economy may improve significantly.

So far, the qualification rate, defined as the proportion of workers endowed with a technical course, has raised from 1.4% in 1996 to 5% in 2003. In 3 years time this ratio is expected to rise to 10%. The target for 2010 is 25%.

Subsidies to job creation require a banking co-lateral. This allows the government to take the money back if the job is closed before the agreed term.

4.2.2 CAP

Milk production is the most important sector in Azores. Although some other cultures subsist (pineapple, garden-beet), farmers were induced along the 1990s to expand milk

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Since most exploitations are of small scale, CAP aids play an important role in Azores, as far as social cohesion is concerned. CAP aids are well distributed among farmers and over the territory. This contrasts with the general rule of CAP, that 80% of the aid goes to 20% of the farmers. Pillar I aids represent a reasonable share of farmer incomes, helping the rural population to remain in situ. Of course, the drawback is that the policy has created dependency and is contributing to keep the land sizes small.

To the extend that CAP aids remain proportional to production, they are giving rise to a distortion, measured by the deviation in respect to the pattern of production that would be achieved by the law of comparative advantages. Although the natural conditions in Azores are favourable to milk production, one should note that milk production was not that important before CAP protection schemes were available. As in other European regions, it may well be the case that other cultures with higher ex ante profitability are being neglected because of the policy.

The de-linkage of aids from production is desirable from the efficiency point of view. However, the Azores Federation reacted strongly against de-linkage. The apparent reason is that they first want to obtain an increment in the milk quota, so as to raise the total amount of aids received, before considering the de-linkage option.

The Federation also reacted negatively against the progressive reduction of aids (modulation). Although most exploitations are of small scale, farmers in Azores receive more than 5.000 euros per annum under a special programme called POSEIMA. If a special regime was not applying to Azores, "modulation" would lead to a significant losses among the farmer community.

Although his is a pure rent-seeking behaviour, it should be noted that a significant fraction of farmers is aged and not suitable to be transferred to other sectors. Had subsidies been removed and a dramatic social and economic problem would emerged in Azores.

The production bias caused by the CAP policy has also impacted negatively on the environment. Chemical products (phosphates) are contaminating the water all over the territory and two important lagoons (Sete Cidades and Furnas) are under ecological distress.

Because of the milk quotas, a plan is being developed involving farmers and the authorities to create a cluster on beef production, under a common umbrella of geographical certification. This may involve some CAP pillar II funding. This plan is based on the recognition that, because of the increasing EC regulation, the minimum scale for milk production has risen. According to the farmers representatives, CAP regulation are driving out (using anticipated reforms) some small producers. In light of this plan, the smaller farmers will be induced to shift from milk production to beef production. A process of anticipated reforms is also envisaged, so as to promote the re-dimensioning of exploitations.

In general, CAP pillar II plays only a limited role in the region. Farmers are not motivated for this dimension. The few Agro-tourism initiatives are not being undertaken by the traditional farmers.

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4.2.3 State Aids

Under SIDER, the regional government is able to subsidise firms belonging to any sector of activity. In practice, this ability has been used: the funds have been distributed among all sectors, including services, housing construction and tourism related activities.

From the social cohesion point of view, this policy is probably effective. However, such a generosity lacks of economic rationale. For example, it may be questioned whether firms operating in non-tradable sectors like housing construction or street shops should be supported by SIDEP. Non-tradables are, by definition, isolated from external competition in every economy and this does not make it particularly eligible for a subsidy specific to insular economies. Moreover, these activities only exist because their demand is derived from subsidies attributed elsewhere. Tradables, on the contrary, are highly affected by transport costs. Unfortunately, the policy does not discriminate the two situations. Rather than spreading the subsidies all over the economy, a more focused policy would be advisable.

4.2.4 Competition Policy

A main problem was identified in connection flights. Airlines are being explored under monopoly or under special agreements involving the operators (disguised monopoly). In consequence, air fares for non-residents are well above the market prices. In Azores, where periphery and transport costs are a key issue, such and extra inefficiency is rather unwelcome.

Because of geography, the advent of the internal market had only limited effects in Azores. Firms are protected from external competition. Moreover, wherever the local market is not big enough to support a large number of competitors, this translates into monopolistic behaviour and consumer losses.

To overcome the costs caused by the physical barriers, both direct and indirect taxes in Azores are lower than in Portugal mainland. The reduction in VAT is however uniform across products, thus not depending on the actual transport costs. This gives rise to significant distortions. For example, software industries, which are not affected by transport costs, are not surprisingly moving from the continent to Azores, so as to take profit of the lower direct and indirect taxes. On the other hand, in industries where transport costs are important, the relative prices moved in the wrong directions.

4.2.5 Environmental Policies

There are three main areas in which the environment policy has produced relevant effects:

The implementation of structural policies has been accompanied by studies evaluating its environment impact. In general, whenever a negative impact was foreseen, alternative solutions have been proposed, without any particular problem.

In the last years, the production of urban waste has risen significantly in Azores. A significant amount of EFRD funds have been used to improve the waste collection and to drain urban liquid residuals. Since there is no minimum scale in Azores to create an incinerator, the waste has been exported abroad. This is, of course, an expensive solution, specially because 9 islands are involved.

In Azores, the air pollution caused by carbon emissions is negligible. However, cattle creation has led to a fast deterioration of the quality in water sources. At moment, the

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In general, the environmental policy is perceived to have been dominated by specific interventions to face particular problems. The actions undertaken are perceived, however, to be prompt and efficient.

In balance, there is no perception that environment regulations are constraining the growth perspectives of the region. On the contrary, there is an understanding that environment protection is essential for sustained development.

4.2.6 Common Fisheries Policy (CFP)

We perceived this sector to be largely ignored among the community in Azores. Although the weight of fishing related activities in GDP is declining, there are some important fisherman communities. By contributing to the modernisation of the fleet and ruling the sector, the CFP had an important role in driving the fisherman incomes to levels comparable to those of other activities. The reduction of the fleet led however to some earlier retirements and may have contributed to some long term unemployment in particular communities.

A main concern is whether the openness of exclusive waters to other EU countries will have an impact in the fishing stocks.

4.2.7 Transports, energy and telecommunications

The improvement in airport infra-structures in all islands, and in special in Ponta Delgada, Angra and Horta had a significant impact in the region.

Mobility within the archipelago has also improved, but it is still much dependent on random factors, such as whether conditions.

As far as energy and water supply is concerned, there is still much to do. For example, the regional electricity network and water supply only reach 5% of the farmers.

4.2.8 Research and Development

Research and development in the region is mostly undertaken by University of Azores. Excellence has been achieved in the research areas of geothermal energy and oceanography. With EFRD co-financing, a geothermal electric generator was constructed in S. Miguel.

Biological agriculture is negligible in the region. There is no link between agriculture and the regional innovation policy.

In general, RTD policies do not have a major impact in the economy of Azores. Firms are not involved in R&D activities and government initiatives are not visible.

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5 COORDINATION BETWEEN THE COMMUNITY POLICIES

Despite the large degree of policy interdependency in a small region like Azores, the different programmes are being implemented in a rather independent (and, in some cases, conflicting) manner.

As far as agriculture and tourism is concerned, the natural link via agro-tourism is not being explored. The opportunity exists, however, to develop such a synergy, under the CAP second pillar.

The tourism sector was elected as the main anchor for policy intervention. In general, actions involving tourism related activities are perceived to have some kind of priority. There are some concerns, however, as to whether such an emphasis on tourism may be a mistake, because of the Azores adverse climatic conditions.

In general, co-ordination between different levels of government (regional, national, municipalities) is perceived to be deficient by different actors. It appears, however, that co- ordination problems are now a matter of increasing attention in the administration.

6 GOVERNANCE ISSUES

Having a regional government is an advantage in respect to other Portuguese regions. However, the structure of the administration is perceived not to be fully adapted so as to promote an effective intervention. A greater co-ordination involving the regional government and other levels of the administration would be desirable.

Access to EC funds has helped the local authorities (as well as private agents) to improve their planing capabilities. As in other regions, the elaboration of PRODESA was preceded by an overall discussion involving key actors in the region, enriching the debate and the understanding of the global problems facing the economy.

Because of the eligibility requirements, the policy was also forced to incorporate some concerns (e.g, environment) that otherwise could have been neglected.

Farmers complain the slow official response to project applications (IFADAP, and regional government). They mentioned a time length of 4 years, although with a tendency to decline. An usual practice is to proceed with the project implementation prior to approval, using some special credit lines offered by the banking system. But the risk exist of the projects to be rejected because of this.

7 CONCLUSIONS

The economy of Azores is largely dependent on the size of the public administration and on transfers from abroad. Without these transfers, the economy would collapse. These transfers are necessary, so as to compensate for the insularity conditions.

Cohesion fund and the structural funds have been tremendously beneficially to the region, contributing to improve the production capabilities. In general, subsidies are well

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FINAL REPORT (ANNEX I) succeeded in reaching a great share of the population and are relatively well distributed across sectors and islands.

However, some of the existing mechanism (CAP, SIDER) are giving rise to significant distortions. In some sectors, the policy is promoting dependency rather than enhancing competitiveness. "Getting the prices right" should be a matter of more concern for the regional authorities.

8 GUIDELINES FOR COMMUNITY ACTION

- "Get the prices right" (changes in the structure of VAT, special tax regime for transport costs).

- More sectoral discrimination (tradables, rather than non-tradables)

- De-link CAP subsidies from production

- Protection of water sources

- More attention to the public transportation network

- Increasing competition in airlines

- Reinforce the training actions

- Greater co-ordination between agriculture, tourism and environment

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APPENDIX

Cohesion Indicators

Indicators obtained for Açores are listed in the table below - see attached files for detail. Demographic Emigration flow as a % of working age population 1990-2000

Emigration rate1 1990-2000

Child mortality rate 1990-2000

Natural growth rate 1990-2000

Population Growth Rate 1990-2000

Percentage of working age people in regional total population 1990-2000

Demographic dependence index 1990-2000

Economic Regional GDP per head (PPS) 1991/95/00/01

Regional GVA per working age population [15 - 64 years old] 1990-2001

Regional GVA per worker 1990-2001

R&D employment as a % of the regional workforce (Full Time 1990/92/95/97/99 Equivalent per unit of labour force) Gross Expenditure in R&D as percentage of regional GDP, by 1995/97/99 performing sector (Business, Government, Higher education and Public non Profit Institutions) Employment rate 1990-2001

Participation rate 1990-2001

Employment growth rate 1990-2001

Poverty & social exclusion Unemployment 1990-2001

Unemployment rate 1990-2001

Benefit Claimants (Incapacity and Disablement) as percentage of 2001 total labour force (Disablement, oldness and survival Education Students Registered as percentage of the relevant population 1989/90-1999/00 group

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Environment Energy consumption in Kwh per consumer 1994-2001

Population Covering Rate (Collection of Urban Solid Residuals, 2001 Drainage of Residual Waters and Treatment of Residual Waters) Agriculture Mechanization Index2 1985/89/93/95/97/99

Average daily payment in agriculture 1991-2001

Percentage of regional GVA derived from agriculture 1990-2001

Growth Rate of GVA per worker in agriculture 1990-2001

Percentage of regional employment in agriculture 1990-2001

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List of inteviewed key informants:

Institution Location Name Position Email Phone Thursday , 17 Chief of Secretaria Dr.ª Ana Department - Ponta raasre06@mail 10h Regional de Margarida Planning and 296.283.335 Delgada .telepac.pt Economia Reis Management of Incentives

Azores Chambre Ponta Dr. Mário General 14h30 of Commerce and [email protected] 296305002 Delgada Custódio Secretary Industry

Professor, University of Ponta Prof. Carlos 17h Regional csantos@note 296650084 Açores Delgada Santos Economics s.uac.pt Friday, 18 Direcção Regional da Juventude, Ponta Dr. Rui Regional bettencourt@d 9h 296209600 Emprego e Delgada Bettencourt Director rjefp.raa.pt Formação Responsável Câmara Municipal pela Gestão Vila Franca pres.cmvfc@m 11h Vila Franca Dr. Braga dos Fundos 296539100 do Campo ail.telepac.pt Campo Comunitários na Câmara President of Federação Ribeira Dr. Jorge the Azores aasm.cua@ma 14h30 Agrícola dos 296490000 Grande Rita Federation of il.telepac.pt Açores Farmers Professor of Labour University of Ponta Prof. Cabral Economics, josevieira@not 17h 296650084 Açores Delgada Vieira Expert on es.uac.pt; Azores Economy

Reports Obtained

Programa Operacional para o Desenvolvimento Económico dos Açores

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SUOMI / FINLAND:

REGION: ITÄ-SUOMI

ELABORATION:

Author: Margita Lukkarinen Collaborator: Laura Flinkkilä

From: Oy Coop Consult Ab Kokkola Finland

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF ITÄ-SUOMI. FINLAND

EXECUTIVE SUMMARY

East Finland consists of four regions and four Regional Councils in charge of regional development and spatial planning. All regions of East Finland except Kainuu are members of the Province of Eastern Finland. Kainuu belongs to the Province of Oulu. In East Finland there are four Regional Employment and Economic Development Centres. There are also four Regional Environment Centres. The fact that many regional actors operating in the region cover have different boundaries hinders co-operation and the creation of relevant project entities. It also makes obtaining of qualitative information difficult at NUTS II level as well as co-ordination of programs.

The region of East Finland is situated in the easternmost part of the country and of the present European Union. The common border with Russia is 560 km. The region is extremely sparsely populated, the population density is only 8 persons/km2, in Kainuu only 4 persons/km2.East Finland is underdeveloped in comparison to the rest of the country. The area is distinguished with depopulation and very high unemployment rates. The GDP is lower than in the rest of the country.

The share of agriculture and forestry within the GDP is three times higher compared to the rest of the country and the share of industry is 3-5 percent lower than in average. The importance of public services grow moving further up north in East Finland and covers 24 percent of the added value in the region. Employment is not expected to increase. The outmigration of highly educated population in working age together with the unbalanced production structure is one of the strongest factors influencing the economic development.

The main CPs with major impact on regional cohesion in East Finland is CAP, Regional Policy and Environment. In East Finland most of the farms (45%) are producing milk. The impact of Cap has changed the conditions for framing dramatically. In East Finland the decrease in number of farms was 5000 between 1995-2003.

An overall view shows that substantial development and improvement has been done since the shift from a fragmented to a complete programming area of East Finland has had a positive impact both on economic and regional cohesion. The impact on regional cohesion was clearly shown in the evaluation of the Obj 6 program 1995-1999. Rural development policies as well as Community Initiatives like Leader and national Pomo has helped the region to survive from the structural changes.

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GENERAL INDEX

1 COMMENTS ON THE ACTIVITIES

2 CONTEXT AND BACKGROUND 2.1 BASIC DESCRIPTION OF THE ADMINISTRATIVE FEATURES 2.2 BASIC DESCRIPTION OF THE REGION

3 MAIN CONNUNITY POLICIES 3.1 REGIONAL POLICY 3.2 AGRICULTURE AND FORESTRY 3.3 FISHERY 3.4 ENVIRONMENT 3.5 STATE AID 3.6 OTHERS

4 ASSESSMENT OF THE IMPACT: MAIN RESULTS

5 COORDINATION

6 GOVERNANCE ISSUES

7 CONCLUSIONS

8 GUIDELINES FOR THE COMMUNITY ACTION

BIBLIOGRAPHY

APPENDIX

Index of tables included in ANNEX II

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1 COMMENTS ON THE ACTIVITIES

The activities have been carried out between April and mid-June 2003. The gathering of information was mainly carried out in May.

The collection of data has been very complicated due to the fragmentation of the information requested, the areas of the various programmes being different from the areas to be studied: the authorities dealing with the programmes seldom cover precisely NUTS II regions.

The quantitative information on Structural Funds was easy to obtain while information on Community Initiatives and other Community Policies implemented at NUTS II level was difficult to get. It was almost impossible to assess the impact of the policies without going into the very projects carried out by region, which would have requested months of additional work.

The collection of quantitative information has mainly been done by using available databases and by asking officials at the ministries to provide the information at NUTS II level. It should be notified that the figures obtained do not necessarily correspond to figures obtained from evaluation reports. Some of the information turned out to be strictly confidential, priced and not available until after negotiations with high officials. A lot of efforts were put into adding quantitative information at NUTS III level together in order to be able to report at NUTS II level. It was also difficult to report on those Community Initiatives and other CPs, which were on a major scale and implemented in multiple regions or nation- wide.

Much information was also obtained from reading area descriptions as well as policy and strategy documents at regional level. Most CPs from the previous programming period had been evaluated or at least there were mid-term evaluations available. Some regions had made own enquiries concerning the CPs; programming, implementation, coordination and lessons learnt.

The qualitative data on ESF and ERDF was obtained from a series of evaluation reports but the quality of some of these was quite weak, therefore interviews with key informants were needed. Some evaluations were more descriptive than evaluative, so it was important to interview actors at national, regional and local level. High officials from the ministries and special interest groups as well as officials at regional level were interviewed personally, face to face, over the phone or through enquiries (all Regional Councils and regional environment offices concerned).

Due to the complicated structure of regional development in Finland, there was a clear demand for interviews with actors at different levels in order to get a comprehensive picture of the situation and of the nature of cohesion.

The interview methodology was based on theme interview method, which is one of the most usual interview methods used when gathering profound qualitative information. It is half-structured method which means that while the informant is encouraged to speak freely on certain themes, the interviewer is enable to follow a certain beforehand defined theme list. The themes used on this study were based on secondary data and on the study objectives.

List of interviews and key informants:

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Ministry of the Environment: in-depth interviews with five Senior Advisers and higher officials at the Land Use Department and the Environmental Protection Department (21.5.03; 27.5.03; 5.6.03); shorter or general-level telephone interviews with several senior officials (12.5.03; 15.5.03; 20.5.03).

Ministry of Agriculture and Forestry: 3 in-depth interviews with different Senior Advisers at the Department of Agriculture (12.5.03, 21.5.03, 26.6.03) shorter or general-level telephone interviews with several senior officials (16-18.6.03).

Ministry of the Interior Telephone- and e-mail interviews and enquiries to senior advisers (April – august 2003)

The Central Union of Agricultural Producers and Forest Owners (MTK): in-depth interview with a top official (23.6.03).

The Central Union of Swedish-speaking Agricultural Producers in Finland (SLC): In-depth interview with an official (22.5.03)

Ministry of Transport and Communications Finland: telephone interview with a Senior Adviser. (21.5.2003)

Finnish Secretariat for EU R&D. Technology Development Centre (TEKES): telephone interview with an Adviser. (15.5.2003)

Numerous phone calls and emails to regional actors (Regional Councils, Regional Environment Centres, Regional Employment and Development Centres) during April - June

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2 CONTEXT AND BACKGROUND

2.1 BASIC DESCRIPTION OF THE ADMINISTRATIVE FEATURES

The regional administration in Finland is formed on one hand by state administration at regional level and on the other by regional administration as part of local self-government. The state regional authorities carry out tasks assigned to them by the central government at the regional level as well as steer the activities of the state local administration.

The most prominent authorities of the state regional administration are the Employment and Economic Development Centres, the State Provincial Offices, the Regional Environment Centres and the road districts subordinate to the Finnish Road Administration. The Employment and Economic Development Centres aim to promote business and regional development. The State Provincial Offices act as general administrative, supervisory and security authorities at the regional level. There are six State Provincial Offices in Finland, five on the mainland and one for the autonomous islands of Åland (Ahvenanmaa).

There are 19 Regional Councils in mainland Finland. These are statutory joint municipal boards acting according to the principles of local self-government. They function as regional development authorities and aim to promote the independent and equitable regional development of different parts of the country. Moreover, they are responsible for the general planning of regional policy and its implementation as well as for the international contacts of their respective region.

Sub-regions are defined mainly on the basis of employment and cooperation between municipalities. There are 79 sub-regions on the Finnish mainland. Parameters representing regional development are monitored at sub-regional level.

The number of municipalities in Finland is 446. The municipalities have a dual function. Firstly, they function as the basic regional administrative units of our country, and secondly as the basic units of the self-government of the citizens. The municipalities play a central role in society through organising most of the welfare services. Within the central state administration, municipal affairs are administered through several ministries.

2.2 BASIC DESCRIPTION OF THE REGION

2.2.1 Regional actors

The Nuts II level region of East Finland (FI13) consists of four regions (see Map 1): the region of Southern Savo (numbered 10 on that map), the region of Northern Savo (11), the region of North Karelia (12) and the region of Kainuu (18). Those regions are also the operational areas for the four Regional Councils. The Regional Councils are in charge of regional development and planning. They also coordinate the decision-making concerning structural funds channelled to all regional actors. The Regional Councils also distribute objective 1 funding in the region and may define its focus regionally.

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Map 1. Regions in Finland Map 2. Provinces of Finland

Mainland Finland also is divided into 5 provinces (see Map 2). All regions in East Finland except for Kainuu form the Province of Eastern Finland (Itä-Suomen lääni). Kainuu belongs to the Province of Oulu (Oulun lääni). The provincial State Office of Eastern Finland (for Kainuu that of Oulu) is responsible for distributing the ESF funding, which is channelled via the Ministry of Education.

The Ministry of Trade and Industry, the Ministry of Agriculture and Forestry, and the Ministry of Labour have joined their regional forces into Employment and Economic Development Centres (T&E Centres). In East Finland there are four such T&E Centres (see Map 3): South Savo (number 7 on that map), North Savo (8), North Karelia (9) and Kainuu (14). The T&E Centres function as specialists and contributors of EU funding. Each Centre also develops EU co-operation in its own area.

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Map 3. Employment and Economic Map 4. Regional Environment Centres Development Centres (T&E Centres)

Environmental issues are handled regionally in 13 Regional Environment Centres (see Map 4). Environment Centres are participatory and guiding authorities whose task is to assure the prerequisites for sustainable development in the region. Four Regional Environment Centres are operating in East Finland: South Savo (numbered 6 on that map), North Savo (7), North Karelia (8) and Kainuu (12).

2.2.2 Area description

East Finland is situated in the easternmost part of the country and of the present European Union. The area’s common border with Russia is 560 km. East Finland consists of four regions, each with different strengths and weaknesses. The different location and surroundings of each region contribute to their conditions of life and development. The location of the northernmost region of East Finland, the region of Kainuu, for example, makes it more isolated than the other regions in East Finland. The latter have better connections to the economic centres in southern Finland and Russia. There are, however, many features common to all of the regions.

East Finland is a very large area, altogether 85,200 km². The area is very sparsely populated with only 676,579 inhabitants (12/2001). The population density is therefore 8/km² (Finnish average: 15/km²). The most sparsely populated area is the region of Kainuu where the population density is only 4/km².

East Finland is entirely an Objective 1 area during the programming period 2000– 2006. During the previous programming period one region was Objective 5b and the others Objective 6.

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East Finland is underdeveloped in comparison to the rest of the country. The area is distinguished by depopulation and high unemployment rates. Also the GDP is lower than in the rest of the country. At regional level, Kainuu has the far lowest GDP of 65 % of the national average (12/2001). For South Savo, the figure is 69 %, for North Savo 74 % and for North Karelia 75 %.

Not only the volume of the GDP of East Finland differs from the rest of Finland, the structure does, too. The share of agriculture and forestry within the GDP is three times higher compared to the rest of the country and twice as high in the rest of the regions in the rest of Finland. Correspondingly, the share of industry is 3–5 percent lower in the regions in East Finland than in average in Finland.

The importance of public services grows when moving up north in East Finland. In East Finland as a whole, the public sector covers 24 percent of the added value of the region. Regarding the future regional development of the region, it is worth underlining that in East Finland employment is not expected to increase in the two sectors most important to the region: public services and primary production. Also, the development of companies in the electronics and information technology is very modest.

The migration of the highly educated population in working age to the growth centres in the south is, together with the unbalanced production structure, one of the biggest factors influencing the economic development.

In the 1980s Finland was practically totally employed, the unemployment rate being 3.2 % in 1990. During the economical depression of the early 1990s, the unemployment rate in Finland went up to 16.6 % but has now come down to 9.1 % (2002). Still, especially in East Finland, unemployment rates are very high. In the regions of South Savo and North Savo, the unemployment rate is around 15 % (02/2003). In North Karelia the rate is 18.2 %. Kainuu has the highest unemployment in Finland, 20.9 %. The loss of workplaces was enormous in East Finland during 1990–1996: 62,000 jobs, i.e. every fifth job was lost.

East Finland is known for its thousands of lakes. Of the total surface of the area, 17.5 % is covered by lakes. The biggest one is Lake Saimaa with its 4,377 km². The land area is covered mainly by forest. Forestry is also an important industry and source of income. The state of the environment and the water quality are mostly very good. However, sustainable development and waste management have to be taken seriously in order to safeguard that future generations, too, have high-quality preconditions for life. Phenomena such as global warming, the greenhouse effect, and acidity also affect the remote areas of East Finland.

2.2.3 Special features in each region

South Savo

South Savo is the southernmost region of East Finland. Therefore, in exception to other regions of East Finland, South Savo cooperates closely also with south and southeast Finland and St Petersburg in Russia. The region consists of 25 municipalities. 25 % of the surface area is water, and the relative proportion of shorelines and waterways is the biggest in Finland. Due Therefore South Savo region is a popular region for summer cottages.

The economic development has slowed down due to an unbalanced economic life, low educational level and depopulation. The region mostly provides raw materials for the forestry and food industries, instead of manufacturing end-user products. However, the South Savo region is a forerunner in ecology and sustainable development especially for agriculture, but also for economic and leisure life. The region is also a pioneer in some innovative areas, for example in certain environmental technology applications.

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North Savo

North Savo consists of 24 municipalities. The centre of the region is Kuopio where the University of Kuopio is located. The population density in North Savo is 13/km², higher than in the other regions in East Finland and close to the national average.

Forests cover 83 % of the land surface area and they are very productive. The agriculture is concentrated to dairy production and in some areas to berries. A problem is still the high rate of primary production. Other strong industries are metal, information technology and environmental technology.

North Karelia

The North Karelia region is located in the easternmost area of the EU, but due the good connections, e.g. Brussels can be reached within five hours. North Karelia alone has over 300 km of border with Russia, and there is a waterway to the Baltic Sea via Lake Saimaa. The centre of the region is Joensuu, where a university is situated.

The North Karelian nature is particularly significant not only as a source of livelihood but also because many traditional rights of enjoyment, such as fishing, hunting, picking of berries and mushrooms, and boating, are connected to nature. 70 % of the surface is covered by forest and the economic activities have been based to the utilisation of the forest resources. In addition the key fields of competence include plastic, metal and stone industry. There are no major environmental problems, the most significant ones being a decrease in biodiversity and fragmentation of the natural environment.

Kainuu

Kainuu is the northernmost region of East Finland. It consists of ten quite vast municipalities and very sparse population. The centre of the region is the city of Kajaani. The cooperation is directed to Northern Finland and Russia in addition to East Finland. The location is distant but connections are good.

Forests, lakes, wetlands and hills dominate the landscape. The forests are important for their crop, but also recreationally. Nature and natural assets are pure and qualified and provide with good opportunities to further development and processing.

Primary production is significant. Food production is concentrated to dairy and berry products. In Kainuu there also is industry specialised in electronics, but the number of enterprises is low in proportion to the national level. The unemployment rate of 20.9 % is the highest in Finland (2/2003). Due to high structural unemployment rates and concurrent unemployment, exclusion constitutes a true problem in Kainuu. Together with the rest of the East Finland, Kainuu is also suffering from the migration of educated young people.

3 MAIN CONNUNITY POLICIES

3.1 REGIONAL POLICY

The objective of the regional policy is to achieve balanced regional development throughout Finland. Together, the national regional policy and European Union regional

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FINAL REPORT (ANNEX I) policy form an entity, which promotes the equitable and independent development of different parts of the country while also supporting less developed areas. For this purpose, Finland has adopted a programme-based regional policy and a system of graduated regional support for business and industry according to a geographical breakdown of aid areas.

The Ministry of the Interior's Department for Development of Regions and Public Administration manages regionally defined programmes of European Union regional and structural policies, the European Regional Development Fund (ERDF), the Interreg and Urban Community Initiatives in Finland. The Regional Councils act as regional development authorities in the regions.

Projects related to EU enlargement, for example Phare Twinning, are also important in view of regional development.

The aims of national regional policy and the measures taken to implement them are confirmed in the regional policy objective programme accepted by the Government. These include the Centre of Expertise Programme, Regional Centre Development Programme, sub- regional cooperation, urban policy, rural policy and development of the island areas. In addition, projects are under way to revise regional legislation and the regional development strategy, to relocate the activities of the State and to increase the efficiency of business aid.

3.1.1 EU policy

EU financing is sought from the authorities operating in the area, usually from the Regional Council, the Employment and Economic Development Centre, the State Provincial Office or the Regional Environment Centre. Applications should list the project goals, and include a cost estimate, the need for financing and a project plan. Management and reporting of EU projects proceed in accordance with strict rules.

The starting point in the planning of a EU project consists of four principles: focus, partnership, added value and programme-orientation. The project has to be planned for a specific purpose. It has to implement a certain EU programme and be linked to regional development and the regional development strategy.

During the last programming period, East Finland was partly Objective 5b and partly Objective 6. During the present period, the entire East Finland is covered by Objective 1.

ERDF Objective 6, 1995–1999

The Finnish Objective 6 programme covered 60 % of the surface of the country in north and northeast Finland. The total area is 206,000 km² but the number of inhabitants is only 840,000. The area is sparsely populated with only 4 persons/km². The Objective 6 programme covered almost the entire East Finland: the regions of Kainuu, North Karelia and South Savo.

The objective of the programme was to continue and strengthen the national efforts in developing the conditions for enterprises, diversifying the sources of income and maintaining the acceptable living conditions in the region. Efforts were to be made in order to increase the share of the Objective 6 regions in the Finnish economy. The very strong participation of the regions in preparing the programme created favourable conditions for a successful implementation.

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The measures in the programme have been crucial in order to maintain and restructure the agriculture of East Finland, but as the situation in the rural areas has changed very dramatically the volume of the programme was not sufficient enough for changing the operational conditions. The direct impact of the 5a measures can be clearly identified when comparing with the situation in the whole country and in the regions outside the Obj 6 programme. The intermediary impact of the investments upon employment can also be identified in purchasing goods and services.

The area covered by Obj 6 is now more dependent on external support than it was before Finland joined the European Union. The farmers have made efforts to compensate the reductions of their income by increasing the size of the farms and raising the level of efficiency, but the agricultural income during the programming period remained lower than it used to be.

However even though the negative trends and development in the Obj 6 area have continued during the programming period, the situation would have become worse without the Obj 6 programme. According to the evaluation report the skills of the workforce were improved by training and development measures. There was a genuine diversification of the economic life, also new opportunities for livelihood were found.

Objective 1, 2000–2006

East Finland (NUTS II) is identical with the Objective 1 East Finland programming area. It consists of the regions of South Savo, North Savo, North Karelia and Kainuu. There are 691,000 Inhabitants and half of them live in the countryside. The strategic emphasis is on strengthening successful business in already existing companies, on diversifying entrepreneurial activity in knowledge-based growth businesses, and on removing the obstacles for development. Strategically the main aim is to strengthen the local economies, to improve employment, and to improve capacities and interaction taking sustainable development and equality into account.

Objective 1 East Finland is implemented in four fields of actions: - Development of entrepreneurial activity ad improvement of the operational conditions of the enterprises (ERDF). - Strengthening of know-how and the capacities of workforce (ESF). - Development of the rural areas (EAGGF). - Development of structures and good environment (ERDF)

The development aspects of each region are based on their special features, which have been taken into account in the preparation phase of the programme managed by the Regional Councils. The regional focus is based on Regional Development Programmes, which have also set the basic criteria to applications.

In South Savo, the main emphasis has been on the structures of higher education and research. Another focus is on development of the operational conditions for the enterprises by improving services such as innovation structures and technology centre. One very important target has been the improvement of the so-called Savo Railway, which enables faster connections from South and North Savo to South Finland and to the capital city area. As the programming period for Objective 1 has only begun, results cannot yet be predicted. However, it is obvious that measures concerning the structures of education, research and economic life would not have been realised in this level without Objective 1 funding.

North Savo has had clear benefits when the fragmented programming period of 1995- 1999 ended and the present programming period begun. Now the whole region is included in

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In North Karelia, the main focus has been very similar to the emphasis described in the Objective 1 programme. The focus has been on supporting investments (wood processing, metal, plastic, stone and food industry), research and development, and education. Also development of the operational conditions of the enterprises, diversifying and strengthening capacities and structures, development of the civic knowledge based society and good living conditions. The unemployment rate and migration are still high even though they have been able to strengthen the positive development in the region with the Objective 6 (1995—1999) and present Objective 1 programme. As a result of the Objective 6 and 1 programmes, cooperation and partnerships between regional actors has increased. Awareness has risen concerning sustainable development, the region is more prepared for the information society, and the competitiveness and know-how of the companies has improved.

In Kainuu the focus has been on four entities of development: the operational conditions of the enterprises, education systems, education structures, and structures of everyday life. The Objective 1 funding is essential for Kainuu, even though the development measured by macro-indicators, such as employment, migration and economy, has been negative. That is also due to the fact that while EU funding has increased, the national funding has been heavily cut down, which is contradictory to the principle of subsidiary. The impact of the programme has been in slowing down the negative development trends for instance by raising the level of skills of the workforce and by developing the rural areas.

An overall view, however, shows that substantial development and improvement has been done in the context of Objective 1 in East Finland. The shift from a fragmented to a complete programming area of East Finland has had positive impact both on economic and regional cohesion. As the regional councils have had the main responsibility for development funding it has enabled them to concentrate on special features of each region.

EAGGF Objective 5b, 1995–1999

The main aim of the Objective 5b programme was to develop areas that are most sparsely populated and dependent on agriculture. The programme was directed to strengthen and diversify the actions of small and medium sized companies, to improve the competitiveness of agriculture, to broaden the basis of income for people in agriculture, and to develop the vitality and sources of livelihood in rural areas.

In East Finland, the region of North Savo was the only region, which had some areas included to Objective 5b programme. One part of North Savo region (Koillis-Savo) was included to Objective 6 programme and some parts were altogether left out of any objective programmes. That fragmentation made the implementation of the 5b programme somewhat problematic. Difficulties were met when trying to form meaningful project entities. Also administration became heavy and especially national financial resources were found inadequate. The impacts of what was expected were neither in relation to national nor international development trends.

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ESF

The activities of the European Social Fund are implemented through programmes. During the programming period 2000–2006, these programmes include Objective 3, the regional Objectives 1 and 2 and the trans-national Community Initiative EQUAL. The programmes were prepared in co-operation with the European Commission, which also adopted the programmes. The central actors from the Finnish public and private sectors, the labour market organisations and other central organisations participated in the programme work at the national level.

The ESF programmes are financed jointly by the EU and the Member States. The EU financing share of Objective 3 and EQUAL are covered by the ESF. The regional objectives 1 and 2 are funded by the ESF and the European Regional Development Fund (ERDF) among other funds. Total funding of ESF co-financed activity in Finland during years 2000–2006 is Euro 3 billion out of which the EU share is Euro 873 million.

The Ministry of Labour is the authority responsible for Objective 3 and EQUAL in Finland. The Ministry of the Interior is the authority responsible for the regional Objectives 1 and 2.

In Finland, ESF activities seek, experiment, produce and implement new solutions for the national labour market, education and training as well as the industrial policies. Good practices are also being spread. The ESF channels funds into developing new models to boost human resources and to secure employment. ESF activities supplement national activities.

Finland's first structural fund period began in 1995, the year Finland joined the EU, and ended in 1999. During the first five years, the total ESF funding was € 2.2 billion, including national public and private funding. For the implementation of different ESF programmes, Finland received € 589 million from the EU. During the years 1995–1999, about 4,200 projects were launched, involving 650,000 people as participants.

In East Finland the EU share was 66 million € during 1995-1999. Additionally there is national and local public funding as well as private funding.

ESF has supported for example: - pathways for long-term unemployment to working life - education and other development arising from working life and enterprises - life-long learning - entrepreneurship - new ways of working - keeping the ageing labour force working - employment of the young, handicapped and women - apprenticeship training - globalisation - new cooperation between administration, organisations, enterprises and education - local partnership

Objective 3, 2000–2006

The Objective 3 Programme in Finland includes the whole Finland except the Åland Islands and in Objective 1 area the Objective 3 is being carried out within Objective 1 Programme. During the period 2000–2006, EU funding is € 415 million in Finland.

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The Eu share for East Finland is 38 million € and additional national and local public funding as well as private funding.

The Objective 3 Programme strategy focuses are: - utilising the demand of the workforce and improving on employment - enhancing the similar opportunities and equality in work life - improving the quality and the effect of education, advancing occupational mobility, and strengthening the relationship between education and work life - developing the know-how equity to support entrepreneurship, renewal of the work life and utilisation of the technology

Horizontal focuses are information society, equality, local partnership, sustainable development, and preparation in every action.

Objective 3 Programme actions have been integrated into national action policies so that they are not overlapping but complementing each other.

The target is to employ and train about 250 000 people in Finland. In practice, the Regional Councils, the provincial governments and the Regional centres for Employment and Enterprises coordinate the projects on the regional level.

COMMUNITY INITIATIVES INTERREG IIA and IIC, 1995–1999

The objective of Interreg IIA was to develop cross-border co-operation. During 1995- 1999 the regions of Kainuu and North Karelia (the Karjala Programme) and South Savo (the Kaakkois-Suomi programme) were covered by the Interreg programme.

The Karjala programme has focused on cultural and entrepreneurial projects. In the beginning there were some problems to start enterprise projects, but especially in 1999 there were a big number of new projects. Many of the projects have aimed at removing the most difficult barriers for cross-border co-operation, mainly related to physical and social infrastructure.

The central issues of the Kaakkois-Suomi programme were to develop traffic communications and entrepreneurship. The main traffic communications between Russia and Finland transverse this region. These also form the main traffic communications to Russia from the Scandinavia and the whole European Union area.

The Finnish input when implementing the Interreg IIC programme was remarkably strong. The objective of the programme was to support trans-national regional development and spatial planning in the Baltic Sea area. All Finnish Obj 6 regions were part of the programme. Out of totally 45 projects eight were led by Finns. Finnish partners also participated in many projects led by others. The Finnish partners received more funding from EU than Finland had put into the programme.

INTERREG III, 2000–2006

The principle of the Interreg programme is that the national boundaries should not be an obstacle for balanced and harmonious development in Europe. The biggest programme financially is Interreg III.

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The Programme is divided into three main aspects: 1. co-operation across borders 2. co-operation between countries 3. co-operation between regions

Finland participates in six Interreg programmes during the programming period 2000 – 2006. Three of these programmes are in the area of either East Finland or South Finland.

Interreg III A Southeast Finland–Russia is a programme of the Regional Council of South Karelia. The total costs in the programme are € 55.780 million, and the EU funding is € 21.800 million

Interreg III A Finland–Estonia is a programme administered by the Regional Council of Southwest Finland. The total costs in the programme are € 29.102 million, and the EU funding is € 14.551 million.

Interreg III A Finland–Russia is a programme of the Regional Council of Northern Ostrobothnia. The support goes also to Kainuu and North Karelia. The total costs in the programme are € 56.400 million, and the EU funding is € 28.200 million.

The cross-border co-operation is an important issue in the region and supported strongly by the Community Initiatives as well as other CPs.

LEADER II and LEADER+

The Finnish Leader II programme was implemented 1996–1999 and the objectives were to support local actions for developing rural economy and living conditions in rural areas. Ten local action groups implemented the program: 2 of these were in South Savo, 1 in North Savo, 2 in North Karelia and 2 in Kainuu. The Leader II programme covered almost the whole of East Finland.

Leader II supplemented the structural fund programmes due to its local bottom-up approach. The programme was very successful in activating and motivating people in rural areas to participate in the development work. As a result of the programme new forms of co- operation were born in the countryside and also between local action groups all over Finland. In the covered rural areas, many micro-business projects, new enterprises and jobs were created.

The projects were mainly in the fields of preserving and improving the environment and living conditions (24%), rural tourism (21%), training (15%), activation and administration of the local action groups (14%), micro- enterprises, handicrafts and local services (12%), utilisation and marketing of products from agriculture, forestry and fishery (12%), and feasibility studies (2%).

Six trans-national Leader II projects were funded from the Leader programme in the Obj 6 area. Finnish local action groups got partners from Sweden, Germany, Ireland, France, Italy and Spain, exchanging information on rural development.

The present Leader+ programme aims to complement local development programmes in rural areas by increasing co-operation between local people and regional actors. These projects are also meant to increase co-operation between European Union members and rural actors.

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Leader+ finances innovative, local projects that develop the countryside. Projects are planned and executed by local action groups. There are 25 local action groups in Finland within Leader+. This kind of local developing method suits well Finnish community-spirited village activity.

Leader+ highlights independence and locality. It is the people living in the area who are in the spotlight when Leader+ projects are carried out. Strategies and development programmes are planned for them to bring new approaches and actors to develop rural areas and to create new employment opportunities and companies. It is desirable that these projects aim to utilise cultural and environmental heritage.

Local action groups have the right to choose the most suitable targets and operational methods for their own projects. This helps the area to get projects that are aimed to improve the local situation in a way that suits for them.

Out of totally 25 local action groups, seven represent East Finland. In East Finland, the focus is on cooperation between rural and urban areas, tourism, village activity, local people, small companies, countryside, and nature.

In general, the size of the Leader+ projects have been about € 20,000–40,000. The biggest projects funded are around € 100,000 which is quite much regarding the fact that the funding for small rural development projects is not usually very big.

SME

The objective of the SME initiative was to help small and medium sized enterprises in less developed regions to utilise common markets and to improve their competitiveness. The SME initiative complemented the structural fund programmes by supporting projects, which promoted the operational conditions of SMEs.

The Finnish SME programme focused on the development of business incubators, developing service structures for SMEs regarding questions related to internal markets and developing the competitiveness of SMEs and groups of enterprises. Furthermore the focus was on developing and transferring new technology, trans-national co-operation, networking and skills of the employees.

SME projects were implemented on Obj 6, 2 and 5b areas. The main share of the EU funding (51%) was used on the Obj 6 area. 2,700 enterprises participated in activities and services offered by the SME initiative, 35 of those enterprises from Obj 6 area.

ADAPT AND EMPLOYMENT

The implementation of the ADAPT and EMPLOYMENT initiatives in Finland was co-ordinated the Ministry of Labour. 15 % of the total funding of ADAPT was directed to Obj 6 area; this objective was exceeded. The objective of the EMPLOYMENT initiative was to direct 17 % of the funding to the Obj 6 area and also this objective was achieved. In the EMPLOYMENT projects broad co-operation networks were established in which different authorities, associations and companies took part. On the basis of an Employment-Horizon subprogramme an action programme for advancing the social and economic integration of disabled was created.

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URBAN

The previous URBAN initiative was implemented in the city of Joensuu (East Finland) and the objective was to finance socially, environmentally and economically related projects in parallel. Two suburbs of the city of Joensuu suffered from severe problems caused by the deep recession of the early 1990s and by this initiative a new model for suburban renewal was created. The objectives were to improve the social and built environment and employ inhabitants in workshops and incubators. Most of the objectives were achieved, 200 projects were started and more than 400 new jobs were created while the objective was 120. By the URBAN initiative the private share of the regional funding was increased by 6 million euro. The URBAN initiative during the present programming period is not implemented in East Finland.

EQUAL

The objective of the Equal Programme is to advance new means with the help of international co-operation. These new means are meant to prevent social exclusion and other kind of exclusion, and to prevent inequality in labour. The activity is connected to develop employment and human resources. Equal aims particularly to enhance the employment of the people who have difficulties to be employed and are in the weakest situation concerning labour.

In the programming period 2000–2006, the funding frame is about € 165 million altogether. Equal covers the whole of Finland apart from the Åland Islands.

The Ministry of Labour is the national responsible authority for Equal and other Ministries (Education, Social and Health for instance) co-finance the projects.

The Ministry of Labour highlights projects that are innovative, wide network projects. These projects implement equality of genders, social dimension of the information society, sustainable development, preparation, support local development, and advance ethnic relationships.

The Ministry of Labour chose 37 projects in 2001. The public funding was maximum € 66 million for those 37 projects, which is about half of the whole program’s public funding frame.

In East Finland the Equal projects have mainly been targeted to unemployed people. The biggest project was about 3,2 million €. The coordinator was located in Kajaani. The project improves gender equality and women particularly within industry and technology. The small region of Kainuu got many big projects; four of them addressed each pillars in the European Employment Strategy. The city of Joensuu implements one project which helps unemployed people, the funding is 2,5 million €. Especially in the regions with significant unemployment problems and people with problems to enter the labour market, the Equal initiative offers opportunities to experiment and to invent new methodologies.

3.1.2 National regional policy

The national regional policy is guided by the Regional Development Act, which came into force at the beginning of 1994. This Act is supplemented with a Regional Development Decree. The aim of the Act is to promote the equitable and independent development of different parts of the country. For this purpose, Finland has adopted a programme-based regional policy and a system of graduated regional support for business and industry according to a geographical breakdown of aid areas.

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The principles of regional policy and general guidelines for development, together with activities that fall within the competence of the Government, are defined in the objective programmes. Regional development funding takes the form of specified budget appropriations allocated to the various administrative sectors. The appropriations can be used to promote regional development targets and the programmes drawn up to achieve them.

The Government approved a new objective programme in November 2000. The programme aims to direct and coordinate regional development work during the period 2002–2003. Furthermore, the programme lays the foundations for the revision of the Regional Development Act and national regional policy in 2000–2006. The objective programme also outlines Finland's opinions on the reform of EU Structural Funds.

Regional development programmes are drawn up by the Regional Councils, which coordinate and direct development work in the regions in cooperation with the local authorities, State regional administration authorities and other bodies. The programmes lay down specific targets and strategies for regional development.

THE REGIONAL CENTRE PROGRAMME

The aim of the Regional Centre Programme (RCP) is the development of a network of regional centres covering every region/province, based on the particular strengths, expertise and specialisation of the included urban regions of various sizes. Regional development based on a network of regional centres results in a more balanced regional structure in Finland and in enhanced international competitiveness. In the future, national regional policy resources are meant to be expressly directed to regional centres, and to the enhancement of the network consisting of them. RCP is founded on the Programme of Prime Minister Paavo Lipponen's second Government, guidelines of regional policy, and the regional policy target programmes of the government. RCP is a government special programme in accordance with the Regional Development Act.

RCP is implemented on 34 regions. It was launched in March 2001 and will last until the end of the year 2006.

In East Finland there are seven programmes: Kajaani Urban Region, Upper Savo Economic Area, Kuopio Region, Mikkeli Region, Savonlinna Region, Varkaus Economic Area, and Joensuu Region.

The aims of the Joensuu Region are to completely utilise the know-how in the region, tighten the regional co-operation and unite regional resources, and to develop specialized company services for the growing companies.

Kajaani Urban Region’s aims are: creating working education, development, and know- how service chains for the region’s growth and possibility areas; increase regional, national and international co-operation and networking in the area’s key lines of activities; and developing the cultural services and products that increase the attractiveness of the area.

The Kuopio Region’s aims are: strengthening the competitiveness of the urban area, innovative and developing urban area, utilising know-how and new technology, the co- operation between region’s counties, use of the land and comfortableness.

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The Mikkeli Region’s aims are: developing know-how, furthering entrepreneurship, vitality of the rural area, networking, and regional co-operation.

The aims of the Savonlinna Region are: know-how and education, operational environment of the companies, infrastructure and services, way to act and networks.

The Varkaus Economic Area’s aims are: strengthening know-how, developing services, new ways to co-operate, increasing workplaces, and democracy in the counties.

The Upper Savo Economic Area’s aims are: lasting economical foundation, environment and environmental technology, know-how, and regional and social integration.

The Ministry of the Interior is in charge of the national co-ordination of the programme in co-operation with other ministries. The state supports the development work of the nominated urban regions by annually granting them basic funds, which amount to a half of the accepted expenses. In 2002 and 2003 approximately 8,2 million € per year of basic funds were granted to the regions. Total expenses of development thus add up to about 16,5 million € per year.

THE CENTRE OF EXPERTISE PROGRAMME

The Centre of Expertise Programme supports regional specialisation and cooperation between different Centres. Finland is thus generating a strong, effective network of Centres of Expertise to meet the challenges of the information society in the 21st century. There are 14 regional Centres of Expertise and two nationwide networks carrying out the Centre of Expertise Programme for 1999–2006.

There are 3 Expertise Programmes in East Finland. They are located in Kuhmo, Kuopio and Joensuu.

The idea of the Virtuoosi Centre of Expertise is to make culture a strategic factor in development. The Centre of Expertise combines modern information technology with cultural content and know-how, all identified within the concept of Kuhmo Chamber Music. The general public is already familiar with this concept in the form of the 30-year-old Kuhmo Chamber Music Festival, which is ranked among the world's leading events in its field. The programme of the Centre of Expertise for Chamber Music is being implemented through separate projects along three lines of operation: - product development, demand awareness and marketing; - compilation and digitising of source material; and - audio-visual content production.

The Kuopio region boasts world-class expertise in the fields of health care technology, pharmaceutical development and biotechnology. Findings in all of these specialisations have been profitably commercialised. Information technology is also a rapidly growing sector in the Kuopio region due to the efforts of the local university and polytechnic.

Organised by the Carelian Science Park company, the North Karelia Centre of Expertise Programme combines two important domains of expertise: wood and forestry, and plastic and metal. The Carelian Science Park provides an innovative operating environment and services in enterprise development (BIC Karelia) and technology for growing businesses. In addition to the fields represented by the Centre of Expertise programme, regional development operations also emphasise development of information technology, optical and laser physics, materials science and chemistry, and cross-border (Russian) expertise.

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SEUTU PROGRAMME

The SEUTU programme is an experiment with 8 sub-regions participating in the project. The aim is to speed up the development based on the regions own strengths and specialisation. In turn, sub-regional voluntary co-operation of the municipalities and thus strengthening sub-regions are the goal for the SEUTU experiment. The sub-regions were selected in 2001 and the programme’s term will end 2005. In East Finland there is only one sub-region in this programme in Pieksämäki.

There is also an administrative experiment in Kainuu that creates novel forms of regional decision-making by gathering such powers from various authorities to an elected regional council.

3.2 AGRICULTURE AND FORESTRY

3.2.1 Agriculture policy

The European Union’s Common Agriculture Policy leads the Finnish agriculture policy. It is important for national economy and for the whole society to secure the foundations for operations both in rural areas, in agriculture policy, and in food policy.

According to reports, Finnish agriculture has survived from the changes caused by joining in the EU. One of the changes was, that the national agricultural system with its farm subsidies was replaced with European Union’s Common Agricultural Policy. The European Union does not regulate the level of market prices with national border protection nor with export subsidies. Finland is securing the income level of the farmers and developing the structure of the agriculture production together with national and the subsidies of European Union.

Finland is situated between the northern latitudes of 60 and 70 degrees, so its location is directly reflected in farming conditions. The growing season in Southern Finland is nearly six months and in Northern Finland two-three months. In Central Europe the growing season is nearly nine months and in Southern Europe more than ten months, so many of the plant varieties grown elsewhere in Europe do not flourish in Finland. Finland also grows plant varieties developed specifically for a short growing season with long daylight.

Finnish agriculture is based on family farms. The average size of a farm is around 30 hectares. Due to the unfavourable natural conditions, the significance of aid in the income formation of agriculture is clearly greater in Finland than in the other EU countries. The objective of agricultural support is to safeguard the competitiveness of agriculture in the different parts of the country and in different lines of production.

Finland’s agricultural support scheme is based on forms of aid allowed under the EU’s Common Agricultural Policy. The most important of these are the aid for arable crops and livestock premiums financed in full by the EU (CAP support) and compensatory allowance and environmental support part-financed by the EU. The national aid scheme complements the EU supports. The EU funds are more than 40 % of agricultural support.

In 2001 there were 75,540 farms receiving agricultural support in Finland. Livestock production was the main line of production on 34,000 farms and arable farming the main activity on 41,500 farms.

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Agricultural and horticultural revenue, including aid, totalled around € 3.9 billion in 2001. Of total revenue, aid accounted for 43 per cent, i.e. € 1.7 billion.

The structural changes in Finnish agricultural policy after Finland’s entry into the EU have been deep and fast. During 1995–2002 the number of farms has decreased by 23 percent. Whereas in 1995 there were totally 95,562 farms bigger than 1 hectare, 22,176 have finished since. Relatively the decrease has been biggest in East Finland, 27 % while the decrease in South Finland during the same period was 23%.

During the same period the average size of farms has grown from 22,8 to 30,3 hectare. The average age of the Finnish farmer is 49 years. The production is expected to remain on the present level as the production grows but the number of farms decreases.

The income of a farmer was in 1990 80 % of an industrial workers income while it was 74 % in 2000.

In 2002 27 % of the farms were occupied in other businesses than farming.

The farms are mainly producing milk in East Finland. In Kainuu, there were 1,342 active farms in 2000. 664 farms of those above were producing milk. Also, in North Karelia the farms have concentrated on producing milk. In Pohjois-Savo, there were 5200 active farms according to the recent information. About 90 % of the money flow of the livelihood consists of animal production. The area produces 13 % of the country’s milk production. In South Savo, there were about 3,700 farms in 2001.

Finland is the most rural country in the present European Union. More than half of the Finns live in the countryside. The development of rural areas is based on multi-annual regional development programmes, where part of the funding comes from the EU. Various kinds of village associations are very active in Finland. There are nearly 4,000 villages, with around 1,300 village associations and societies. Local action groups have increased the opportunities of rural residents to influence their own living conditions. Their activities cover virtually all aspects of life in the countryside. To improve the structure of agriculture, subsidies as well as Government loans and interest-rate subsidy loans are granted to farmers.

Finnish agriculture policy is close to rural area policy, because the agriculture is the most important livelihood in the countryside. According to a strategy for Finnish agriculture covering years 2000–2010, there are seven national aims to help to keep the Finnish agriculture competitive and to keep the countryside vital. The target is to ensure that Finnish agriculture provides safe, high quality, and alternative products also in the future. Finnish agriculture is also meant to meet the other expectations set by the society.

The Commission new Agriculture Policy proposal in spring 2002 surprised the Finnish farmers. The proposal included many negative policies from the Finnish point of view. The most problematic part of the proposal was the separation of the subsidies from the production. The Finnish farms have high variable costs in the production. According to preliminary computation, the proposal would decrease the farmers’ income with € 75 million compared with Agenda 2000 decisions by the year 2012.

Rural policy includes five permanent priorities:

Reform of the economic activities in rural areas Development of know-how and human resources Strengthening the existing service network

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Development of the quality of the residential environment and community structure in rural areas Sustainable utilisation of natural resources

The EU membership has increased and diversified the means available for rural development. In the programming period 2000–2006, the EU support channelled to Finland through the Structural Funds totals EUR 2.1 billion. Especially, the expansion of the Objective 1 Programme has increased the possibilities to develop East Finland.

ALMA

ALMA is the “Regional Rural Development Plan For Areas Outside Objective 1 For 2000–2006” and East Finland is thus not eligible for funding. The programme is implemented in the area of South Finland.

ALMA aims to keep the rural areas lively, by increasing the opportunities of the entrepreneurship, and by strengthening the economical conditions for the farms. The aim is to keep the villages in the rural area functional environment to live, to work, and for the entrepreneurs.

This development programme is implemented in three operational lines: 1) development of the region’s agriculture and forestry 2) diversifying rural economy 3) development of the rural community.

For the programming period 2000–2006, the total public funding is about € 388 million from which the EAGGF part is about € 116 million. Rest of the money comes from the government, counties, and other public quarters.

ALMA is implemented in projects like Leader+ and Pomo+. Local action groups lead the projects in the area. These action groups have highlighted the issues that need the most attention in their areas.

The biggest projects can be about € 300,000 and the smallest can be less than € 5,000.

POMO+

Pomo+ programme was made to supplement the Leader+ Programme. It is merely a national programme. The government pays 80 % of the national public funding and the rest of it comes from the counties. The national funding for the programming period 2001 – 2006 is about € 15,136,913.

General focus is in increasing employment opportunities and livelihood activity in the countryside. Quantitative objective is to create 300 new work places changed into full time jobs. Also, the aim is to renew or keep 130 work places and to influence on founding 60 new companies.

Basically, Pomo+ projects are implemented in a same way as Leader+ projects. Local action groups have created the strategy so that the local needs have been taken into account.

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Out of 25 local action groups in Finland, 12 are in the area of this study. Of these twelve action groups, five represent South Finland and seven East Finland.

The activities vary according to the needs and interests of the villages. One can say that the impact of the work of the actions groups on rural development is significant. Besides strategic planning of the villages, they also promote and implement projects, create and maintain networks – national and international – and are very interested in cross-border co- operation.

3.2.2 Forestry

Forests cover almost three quarters of Finland’s total land area. The Forestry Department in Ministry of Agriculture and Forestry directs and develops Finland’s forest policy, promotes sustainable forest management, wood production and use of forest resources, and the protection of forest’s natural diversity.

The aim of the forest policy is to help advancing the livelihood of the rural areas. The means for the latter are sustainable development of the forests, sustainable care and use of the forests, and securing the diversity and vitality of the forests. There are certain laws to secure the previous, and there are forest organisations and the government’s funding policy to help these targets to come true.

Promoting Finland’s interests in international forest policy has become increasingly important. There are 13 Regional Forestry Centres subject to the Ministry, which are responsible for promoting and supervising forestry, the Forestry Development Centre Tapio, the Finnish Forest Research Institute and the Forest and Park Service.

Forests are extremely important for Finland. Finland is the most densely forested European country and it has a world-class forest industry. Nearly three quarters of the country’s total land area is covered with forests (23 million hectares). Annual felling amounts to around 55-60 million m³; natural loss is around 10 million m3 and annual increment 80 million m³.

Around one quarter of Finland’s export income is derived from forest industry products. 7.6 per cent of the Finnish forests and forestland is protected, which is a very high figure by European standards. The surface area of protected forests and forestland totals 1.8 million hectares. Finland has 440,000 private forest owners, who own 61 per cent of all forests. Forest owners receive advice and professional help, primarily from around 200 Forest Management Associations.

European Union doesn’t have straight authority in most of the questions concerning forest in Finland, unlike in agricultural policy, regional policy, and environmental policy.

ALMA is the only programme where is separately stated the funding frame for the forest and wood sectors’ actions. From the programme’s public funding, the share is 18 % (i.e. € 71 million) during the whole funding period. Another EU funding sources were Objective 1, 2, and 3 Programmes.

Until September 2001, different administrations and counties had funded total € 75.3 million for the projects that are in conformance with the Finland’s National Forest Programme. The EU funding was on average 43.3 % of the public funding which was again 31 % from the total funding.

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Every Regional Council in East Finland has their own Forest Strategy at least until the year 2005. National and international forest know-how has centralised in Joensuu in North Karelia. Forestry is a big employer in the area. Forestry employs also about 3000 people in Kainuu, about 2000 people in South Savo. Pohjois-Salvo’s part of the whole country’s employment in forestry sector is about 8.2 %. Additionally, the wood production sector employs 14.2 %.

3.3 FISHERY

The Department of Fisheries and Game oversees the fisheries industry, game management and reindeer husbandry. Decision-making is based on scientific knowledge relating to the state of fish and game stocks as well as to the sustainability of reindeer pastures. Regional authorities subject to the department are the Fisheries Units of the Employment and Economic Development Centres, and the Game Management Districts.

Lakes account for ten per cent (33,500 km²) of Finland’s surface area, and the country is surrounded by the Gulf of Finland, the Baltic Sea and the Gulf of Bothnia. There are around 3,800 professional fishermen, and around two million Finns engage in recreational fishing. Professional fishing, fish farming, fish processing and fish trading benefit from the Structural Programme for Fisheries Industry and the fisheries components of the Objective 1 Programmes, which are part-funded by the EU.

In Finland, hunting rights belong to the landowner. The number of registered hunters totals around 290,000. Game stocks are regulated by closed seasons and hunting quotas. Game management work carried out by hunting associations improves the habitats of game.

There are no endangered game animal species in Finland. Of the large predators, bear, wolf, lynx and wolverine are found in Finland. In northernmost Finland, the main source of livelihood alongside tourism is reindeer husbandry. Reindeer owners belong to reindeer herding associations, which carry out reindeer management. The National Federation of Reindeer Herding Associations acts as the joint body of the reindeer herding associations. The Ministry of Agriculture and Forestry prescribes for reindeer owners maximum permitted reindeer numbers, so that reindeer husbandry is practised in a sustainable way.

The food fishing industry is managed in accordance with the European Union’s common fisheries policy. This policy consists of resource, market and structural policies as well as a fisheries monitoring system. Of these the structural policy extends also to fishing on inland waters, which alongside sea fishing is significant in Finland. Fishing industry structures are supported by the EU's Financial Instrument for Fisheries Guidance, in accordance with a fishing industry plan.

Finland does not operate a fish auction system and there is no producer organisation; fishermen sell their catches straight to fish dealers. The fish processing industry is divided into industrial fish processing and numerous small family business units. Processing units are concentrated mainly on the coast.

There have been two shipping equipment programmes (MOO III and MOO IV) in Finland in period 1995–1999. The aim has been in changing the capacity of shipping equipment, and in this way to increase the profitability of occupational fishing. There have been over 200 projects to modernize old fishing equipment. The main focus in these projects has been in improving working conditions, hygiene and fishing methods.

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The quantitative target of the Structural Programme, about ten fishing industry development projects, was exceeded with 50 percent during the period 1995–1999. In the measure entity level the funding was used in repairing of fishing industry and to improve the condition for fishes to multiply. The measure entity was used poorly, because the EU regulation limited the applied projects badly. The regulation was not suitable for the Finnish circumstances.

The EU funding is included in the food fishing industry’s Structural Programme or Objective 1 Programme. These Programmes support company investments, infrastructure projects, and development projects.

Finland has its second Structural Programme of food fishing industry in the period 2000–2006. The programme is based on the regulation of the field of food industry, which determines detailed information about structural operations. The funding plans included in this Structural Programme concerns Finland outside the Objective 1 area; the Structural funding of fishing industry in Objective 1 area is included in East Finland’s Objective 1 Programmes.

The target during this period is to improve on the renewing and benefiting fish population. Also the focus is in modernising the fishing equipments, benefiting better the inland water fish population, improve the production condition of the water farming. Sustainable development must be taken into account in every aspects of fishing industry policy.

There were four regions in Finland that were qualified for structural funding during the Programming Period 1994–1999. These regions were South Savo, Kainuu, Lapland, and North Karelia.

During the Programming Period 2000–2006 there are three regions under Objective 1 in Finland that are qualified for funding, East Finland is one of them.

3.4 ENVIRONMENT

Finland has already been working for decades to protect the environment and to promote sustainability. The nature of this work today is reflected in the 1998 national sustainable development programme, which makes all sectors of society responsible for looking after the environment.

The most burning environmental issues today are global issues: climate change, declining biodiversity, the accumulation of wastes, and the over-exploitation of the earth's natural resources - fish stocks, fresh water and forests. Finland has indeed signed all the most significant international environmental agreements, and also helped to shape many of them - especially at European and regional level.

Finland has been particularly instrumental in developing international forest policies, and in building up international understanding on sustainable forestry and conservation issues. One important short-term target is the establishment of a suitable framework for an international agreement on forests.

Where sustainable development and environmental protection are concerned, the heart of the national administration is the Ministry of the Environment. The Finnish Environment Institute - the national centre for environmental research and development work - works under the Ministry, as do 13 regional environment centres and 3 regional

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Municipal authorities have their own environmental responsibilities, for improving environmental protection and awareness, monitoring the state of the local environment, and granting various environmental permits, for instance.

3.4.1 NATURA 2000

Natura 2000 was created to protect the nature. The Ministry of Environment made a proposal in 1997 that included 1,500 targets to be protected. The proposal was 4.9 million hectares. The targets were mainly already protected areas. However, 170,000 hectares were other kind of areas from which 100,000 hectares were private.

The landowners made 14,300 remarks about the proposal. The Ministry of the Environment looked through the remarks and gave altered proposal in 1998. The proposal got smaller with 263,000 hectares because of the remarks.

The landowners had the opportunity to make a sequel remark. Altogether 6,638 sequel remarks were filed. The Minister checked the proposal according to the remarks.

The Government made the decision to approve the proposal for the Finnish Natura 2000 network. Finland made a proposal to Commission regarding the Natura 2000 targets areas – at this stage including both the disputed and the undisputed areas.

According to the decision made by the government, the landowners had the opportunity to complain to the Supreme Administrative Court of Finland. They made 850 complaints in 1998.

The Supreme Administrative Court overruled most of the complaints in 2000.

The Commission gave Finland an order to fulfil the Natura 2000 network decision. The proposal was incomplete because it did not have enough information about certain type of natures nor about the habitats of some species.

The Government listened to the landowners again in 2000. There were 200 notes about the Natura 2000 areas. The decision was delayed because the Attorney General of the Government received about 10 complaints.

The Attorney General gave five decisions about the complaints in 2002. In these decisions the Attorney General states that there have been shortcomings in the Natura preparations. However, these shortcomings were not so bad that they would justify cancelling the Government’s decision.

The Finnish government tried to set up a law that Finland could only change the Natura decision documents with the permission of the Ministry of the Environment. The bill failed in 2003.

The Ministry of Environment gave new proposal about Natura 2000 areas, which were put back under consideration by the Supreme Administrative Court. Parties concerned can file remarks about the proposal to that Environmental Centre responsible for the respective area. The remarks have been given before May 15th, 2003.

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3.4.2 LIFE – the Financial Instrument for the Environment

LIFE, the Financial Instrument for the Environment, introduced in 1992, is one of the spearheads of the European Union's environmental policy. It co-finances projects in three areas:

- LIFE–Nature actions aimed at conservation of natural habitats and the wild fauna and flora of European Union interest, according to the Birds and Habitats directives. - LIFE–Environment enables demonstration and development of new methods for the protection and the enhancement of the environment. - LIFE–Third Countries funds actions concerning technical assistance activities for promoting sustainable development in third countries. - LIFE–Nature and LIFE–Environment have supported the four regions in East Finland.

LIFE – Nature

The LIFE funding is targeted mainly to the subjects in the Natura 2000 programme. The European Union finances maximum 50 % of the total costs and in special occasions the EU finances maximum 75 % of the total costs. The rest of the funding has to come from national sources.

There have been 4 LIFE–Nature projects in East Finland. These projects have well served the aim to protect the nature and animals. These projects have also been quite big compared to LIFE–Environment projects in the area. The biggest project was € 2.2 million with Commission co-funding covering 47 % of the costs. Two other EU projects were also funded by about one million euros. The smallest one received about € 500,000.

One project in North Karelia and another in North Savo aimed mainly to protect the forests, an area addressed in several strategies and programs. In South Savo the target was to plan the use of Lake Pihlajavesi nature with the aim of sustainable development. In North Savo, the other project concentrated on restoring swamps.

LIFE–Environment

LIFE–Environment projects are not only meant to help local problems but also meant to be applicable in wider perspective. The funding is given to the projects that are innovative and demonstrating studies that have been made earlier. The EU funds a maximum of 50 % of the total costs, or 30 % in the case of projects that are expected to produce a remarkable amount of income or savings.

There have been 3 LIFE–Environment projects in East Finland. The biggest project was in South Savo, totalling € 887,895 of which the EU share was € 443,509. Theer was another one almost as big in North Savo. The smallest EU funding was € 160,726.47 to a project in North Karelia.

These projects have been innovative and applicable. The projects have mainly helped the EU policy of reducing the effluent/emission. This has helped the progress of sustainable development and waste management.

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The greenhouse effect, global warming, and acidity are still problems that haven’t been studied with LIFE funding in the regions of East Finland.

3.5 STATE AID

An efficient market is characterized by open competition and safe products. Markets are opened locally, regionally and globally by means of trade and competition policy measures that aim to ensure that goods, services, capital and people can move across national boundaries without restriction.

As a member of the EU Finland is already a player in the single market, Finland is taking part in the framing of the EU’s joint trade policy and implements its policy measures in regional co-operation and international efforts under WTO.

The development of production is not the only thing to have an impact on the smooth running of competition: numerous institutional factors also play a part. Finland has opened the telecommunications, forestry and energy sectors to competition. These sectors have a major effect on competition.

Finland is also going ahead with putting public procurements on a more competitive footing and has drafted a detailed programme for expanding the ownership base of State- owned companies.

Stating its position in different forums, Finland has resolutely opposed supporting traditional fields of industry with public funds.

International competitiveness is a key factor that underpins the job-creating capabilities of companies. The task of public authorities is to formulate and implement long- term policies so as to ensure that companies operating in Finland have the necessary business framework to maintain and improve their international competitiveness. The industrial policy seeks to eliminate obstacles to a well functioning market by promoting competition, the smooth operation of the capital markets and investments in infrastructure, R&D and education and training.

One central objective is to further real entrepreneurship that is independent of State Aid.

In Finland The State and National Aids are delivered to companies via the ERDF Structural Funds, T&E-centres and contracted state owned companies in forms of tax exemptions, grants, loans and subsidies after being notified by the EU. The Commission has decided that a budget of 36 million € is allowed for accelerating write off for SMEs in certain regions during 2001 – 2003.

The Commission has also allowed a budget of 2,7 million € for 2001 and 3 million € for 2002 for loans to entrepreneurs aiming at promoting investments in small and medium sized enterprises and transfers between SMEs.

The State Aids as well as support for development and investments, R&D are included in the regional Structural Funds – also the funding delivered by Finnvera and TEKES (state owned technological development centre)

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Finnvera plc is a specialised financing company offering financing services to promote the domestic operations of Finnish businesses, and to further exports and internationalisation of enterprises. Finnvera is owned by the Finnish state and act as Financial Intermediary for a part of the ERDF funding and state aids. The information is concealed and detailed information on companies cannot be obtained.

In East Finland all regions are eligible for State Aids. In 1995 – 1999 the NGE level in most regions was 28,2%. All regions except North Savo were totally eligible. In 2000 the level of NGE was harmonised. All regions in East Finland are now included in the highest NGE level of 24% and also totally eligible.

3.6 OTHERS

3.6.1 Trans-European Network

Most (85%) of the TEN funding in Finland is directed to the projects connected to the Nordic Triangle (Finland–Sweden–Norway). In Finland it covers the road and rail connections from Turku to the eastern border via the capital region. East Finland therefore is not included in the priority area. As a particularity, the inland ports of the Saimaa Sea are recognised as an entity in the TEN network besides the normal road and rail networks.

The effects of TEN funding to regional cohesion are fairly impossible to define on a short-term basis. How the funding is divided between regions (even at NUTS 2 level) is impossible to find out because of the fact that the development projects are trans-regional or even national and often multi-annual (MIP). Also the benefits of the projects are spreading to even larger areas.

When talking about TEN funding it is also the fact that the funding is directed to issues, not to individual projects. The impact on regional and economical cohesion is minimal and could rather be seen as side effects, taking into consideration the fact that the most important factor of the TEN network in Finland ought to be to connect Finland to the rest of the Europe. Most of the development projects receiving TEN funding have also received national money. In general only 3-6 % of the funding is coming from the EU while the maximum is 10 %. That leads to the fact that the development process could probably proceed regardless of the EU funding.

The managing authority for TEN funding is the Ministry of Transport and Communications. In charge of the implementation of the projects are mainly national Finnish Road Administration, Finnish Rail Administration, Finnish Maritime Administration and Civil Aviation Administration.

3.6.2 Framework Programmes

Finland has participated in individual projects and programmes within EU research programmes since 1987. Fourth Framework Programme was, however, the first programme in which Finns have been able to take part on an equal footing with organisations from other EU Member States due the fact that Finland became the member of EEA in 1994 and a Member State of the EU in 1995. Finnish research organisations and companies have thus increased cooperation with other member states already before the membership.

Information concerning Framework Programmes has not been categorized regionally. The Finnish Secretariat for EU R&D, which is a part of Tekes (National Technology Agency of Finland), was unable at such a short notice to gather and analyse the implementation and

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Fourth Framework Programme

At the national level, over 58 % of the co-ordinating organisations in shared cost actions were research centres and universities. Also the distribution of Finnish participants was very similar. Many of the organisations are operating at national level, one of the biggest being VTT, which is an impartial expert organisation that carries out technical and techno-economic research and development work. In East Finland the University of Kuopio in North Savo and the University of Joensuu in North Karelia as research organisations are worth mentioning as regional actors.

Fifth Framework Programme

The national evaluation on Fifth Framework Programme will be published within one year.

Compared to the European level the number of Finnish co-ordinators is still low. Usually the coordinator in Finland is a research centre.

3.6.3 Innovate Actions 2001-2006

The Innovative actions programme is co-funded by the Regional Development Fund of the European Union. It is being implemented in more than 80 regions in the European Union during the years 2002-2004. Each region has an own programme adapted to its specific characteristics, which will be implemented through the projects to be funded.

The innovative actions aim at supplementing the European Structural Fund programmes and thus at increasing differences of the level of development in different regions. The innovative actions enable testing of risk-bearing ideas and practices, which has not been possible in the framework of the traditional structural fund programmes. The innovative actions improve competitiveness, raise the level of technological know-how and create new jobs in the regions concerned. The innovative actions “aim to create a laboratory for experimentation on regional development in Europe, focusing on actions, which are genuinely innovative”.

In Finland the Innovative actions programme is implemented in three regions; in southern, eastern and northern Finland.

The programme Innovative actions of Eastern Finland (Modern Networked Periphery MONEP) are implemented in four regions (South Savo, Kainuu, North Karelia and North Savo). The programme is in total 3 749 980 €, of which the share of funding granted by the European Commission is 80 %, i.e. approximately 3 million € (ERDF).

The strategic subject of the Innovative actions of Eastern Finland programme (Modern Networked Periphery() is eEuropeRegio, the information society at the service of regional development.

Line-specific objectives:

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“Natural resource based production in information-based economy” is based particularly on business activities, top expertise and development projects relating to processing of natural resources in eastern Finland. This line of action will generate innovative operation models and products contributing to the integration of business and marketing know-how of natural resource based enterprises with e-business and civil information network. The objective is to develop models, which will help regions and communities depending on natural resource based production to manage in changing competition situations and in the information based society.

“Developing information networks of social and health care” deals with organisation of East-Finnish social and health care information systems into seamless service chains. Utilisation of various financing opportunities will help to find a solution to the needs of the region’s hospital districts, health centres, social authorities and citizens, and that in turn will develop services offered to the ageing population cost-efficiently in the tightening economic situation in sparsely populated areas. In addition to basic activities this development and operation environment of the information network includes a significant innovation and entrepreneurship potential, which this project intends to promote by testing risk-worth pilots external to the basic services. Expectations are focused particularly on the innovations in new services and technological solutions related to the public service environment.

11 pilot projects are funded, € 160,000 – 508,500 each. The projects include for example “Network service for forest owners”, projects that develop healthcare districts, creating GEO information, centre and creating new services for local network.

4 ASSESSMENT OF THE IMPACT: MAIN RESULTS

The main CPs with major impact on the regional cohesion in East Finland are Regional development and the Structural Funds on one hand and the Agricultural policy and CAP on the other hand and the environment policy. The other relevant CPs are of minor importance, but have certainly increased cross border co-operation and regional co-operation. Some of them have supported projects that would have been implemented nevertheless by means of national and regional policy and funds, but has brought value added to implementation of the programmes and projects.

The impact of regional policy to cohesion is significant in sparsely populated rural areas. This appears clearly for instance in the evaluation of the Objective 6 programme during the previous programming period. East Finland would have been in big difficulties without support from the structural funds – ERDF as well as ESF. The objective 6 measures were targeted to solve the main problems of the region. These were related to the sparsely populated area, high unemployment rates and low skills of work force and the restructuring of the agricultural policy. Even though the objectives were not achieved it is clear that the situation would have been even worse without the Obj 6 programme.

The Community Initiatives as well as the ESF measures and national funds supported and supplemented the Obj 5b and Obj 6 measures.

According to the evaluation report of the Obj. 6 program the enhancement of the educational level of among the people living in the Obj. 6 region does not necessarily lead to an increased number of jobs. If there is no growing demand for private services there is no increase in the number of companies either.

The statistics and indicators displaying the population development in the Obj. 6 region showed quite negative trends. Paradoxically, it seemed like the Obj. 6 programme had

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A key factor in the promotion of positive regional development in the Obj 6 region is to secure the possibilities for employment, but out-migration is possible even in municipalities with a strong industrial sector.

The concentration of national funding, ESF funding as well as Employment and Equal initiatives and Local partnerships programme to the region of Kainuu has certainly had an impact on the employment, but not as much as expected – the unemployment rate is still among the highest in Finland, exceeding 20 %.

The overall activeness in the region plays a significant role.

In East Finland the impact of structural funds is expected to increase during the present programming period, due to the fact that the whole region is Objective 1 area when the region was divided into Obj 5b and Obj 6 as well as there were non assisted areas in the region. There are now better opportunities .for creating bigger project entities, which cover the whole region and better, respond to the needs addressed in regional programs and development strategies.

It is quite obvious that East Finland has been and will be dependent on national and European support in order to survive and develop means to decrease the underdevelopment, which has constantly been addressed.

In this context the national regional development policy means, like the Regional centres and the centres of expertise, force regional actors to unite and combine their resources in order to create cooperation and transfer know how. Promoting regional centres and subregional co-operation combined with structural policy means seem to be a sufficient mean to prevent migration from the region. On the other hand, it has clearly been indicated that the lack of universities and research centres marginalizes certain regions, why political decision at national and regional level are needed as well.

All persons interviewed were very concerned about the future status of East Finland – whether it will get Objective 1 status or not. The prospects - if the region will be non-assisted - are not very encouraging. Many of the interviewed key informants at all levels expressed themselves very clearly: it means the starting point of the final count down of many regions in East Finland.

On the other hand these means cannot prevent the migration from rural and remote villages to the regional centres. The Local Actions groups are clearly an efficient tool for rural regional development at very local level as they are acting together and on the terms of local inhabitants and their needs. These actors are also potential and important partners and promoters of Community Initiatives and other projects where innovation is requested. The ALMA as well as the national POMO+ are complemented by the Leader + initiative and together they boost regional cohesion in remote areas.

Agriculture

Regarding the consequences of the common agricultural policy for regional cohesion in Finland, there has above all been a big change in the political framework.

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Following the EU entry in 1995, producer prices sank by 40 %. Within the first year of membership, the number of active farmers sank by more than a sixth, from 115,000 to 95,000. The decrease in both the number of agricultural units and their incomes has developed the fastest in Eastern (and Northern) Finland. Uncultivated fields are not an unusual sight. Bureaucracy, furthermore, has increased immensely.

As for fishery, its importance for regional economy is, according to our informants, minor both in the lake area and in the archipelago.

Thanks to the EEA treaty, the harmonisation of Finnish law with that of the EU started already before the Union membership. This goes for agriculture and alimentary production as well as for animal protection. However, the harmonisation of Finnish environmental legislation essentially started only after the 1995 entry into the EU. The transition to the environmental legislation of the EU has clearly been the biggest change and it shows a very significant impact on the agricultural trades and industries in Finland.

It needs to be pointed out – over and over again – that all-European regulations tend to fit very poorly with the natural and cultivated environment in Finland. All too many regulations are very difficult to adapt to the Finnish reality. Nature remains different in different parts of Europe, and in the majority of instances, Finland has been more or less alone in defending its particular points-of-view. Negotiations often have been quite asymmetric for Finland. Consequently, the massiveness of the common agricultural policy, too, in many respects doesn’t very well take into account the realities of Finnish agriculture.

Still, regarding the rest of the legislative work relating to agriculture, harmonisation hasn’t changed very much: in some cases, the law has become more strict, in others, less so.

In the alimentary industry, there have been needs for investment prompted by the EU membership, especially in SMEs. The threshold for taking up entrepreneurship has risen. One may question whether the quantity of legislation really is reasonable, as it already clearly affects the conditions for entrepreneurial activity.

As for the question of agri-environmental versus ‘traditional’ forms of agricultural compensations, it was pointed out that this really isn’t an issue of contraposition: the agri- environmental support has proved to integrate well into the Finnish agricultural scene. Over 90 % of the farms are registered for agri-environmental compensations.

Since the Finnish entrance into the European Union, cooperation between actors has increased essentially. Nowadays, networking is always an alternative to be considered in the scene of agriculture and alimentary industries. Programmes and projects in general prerequisite collaboration within a consortium of partners, and once the new way of working has been internalised, all involved benefit from it. Traditionally in Finland, collaboration among farmers was not an obvious solution; especially this goes for the eastern and northern parts of the country.

Rural development

With the programme period 1995–1999, an unforeseen volume was brought to rural development. Prior to this period, which coincided with Finland’s entry into the European Union, there were only a couple of million euros per annum available for regional development. Then the sum soared by thousands of percents. Funding for enterprises also increased.

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During the financing period of 2000–2006, there is still somewhat more money available for co-funding of rural development through the EAGGF.

Rural regional development is, depending on the sub-region, either funded through Leader programmes or their parallels (presently: ALMA) or integrated with structural funding.

LEADER+ functions well as a sort of ‘pepper funding’ of rural development: it succeeds in mobilising new players in the rural scene – small ones, too – into working on development, it motivates and encourages to find innovative actions and new ways of doing. The workers of the actions groups collaborate closely with people in the countryside and function as advisors to local organisations.

The national ALMA programme for regional rural development (2000–2006) is financed through the second CAP pillar. In comparison with the prior programme period, there has been a positive development in that all rural environments now are eligible for these measures. Furthermore, a very versatile selection of rural development measures can now be included in the programme (e.g. village development; general development schemes of branches or trades; investment, start-up and development support for enterprises).

Positive effects are seen: branch-specific and thematic programmes (e.g. carpentry, tourism, food production) have emerged, there are trans-regional projects, and the local action group work has been mainstreamed into the regional programmes as well. Entrepreneurial supports are graded according the rural setting – remote areas and heartlands receive higher funding in order to promote a more balanced development. The level of ALMA funding, again, is proportional to the population of the target area.

Environment

Through a series of interviews in May 2003 with experts at the Ministry of the Environment, a general panorama was obtained of the impact of European environmental policy and funding on Finland. Questionnaires to regional authorities responsible for environmental policy confirmed the conclusions.

Regarding experiences of the use of different environment-oriented programmes, there has been good general acceptance of their horizontal approach to the environment. But the enormous increase in bureaucracy around funding has become a big problem, especially in agriculture.

All informants shared the view that EC directives are taken too literally in Finland, even in instances when they are quite inapplicable and therefore very complicated to implement.

The general sentiment of the interviews is expressed in a quote from one of the interviewees: “The programmes are not obstacles for good environmental results – basically these are up to the players at the project level.”

Generally speaking, environmental aims are promoted horizontally in the programmes. Therefore, they foster cooperation across administrational and other organisational boundaries. Finnish authorities clearly have begun to cooperate more with each other after the EU entry.

More access to external co-funding tends to better attract potential project partners and commit them to consortia at e.g. the local level in order to tackle concrete development challenges.

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Clearly, too, there is more cooperation between authorities – horizontally as well as vertically. In the field of environment this especially applies to the Ministry of Agriculture and Forestry—Ministry of the Environment axis (and includes e.g. joint internal training as well as coordinating meetings on a regular basis), but there also is collaboration with the Ministry of Labour and the Ministry of the Interior.

Regarding the impact of the environmental programmes the opinion was that maybe the same could have been achieved without Commission co-funded projects, but it is likely that same things would be done parallel in multiple countries without coordination and interaction. This especially goes for LIFE. Also, results would be less transferable. However, transferability often is much dependent on ecological factors; project with an industrial or conceptual dimension tend to be easier to apply in multiple settings.

An important notion that was made by one of the informants was that cohesion has been an aspect of lesser importance for European programmes in Finland. For instance, we have no designated cohesion funds. It is, however, without doubt in the interest of all ministries to keep the Finnish countryside alive and inhabited.

The emphases of e.g. the structural funds are different depending on the region. In unemployment-stricken Eastern Finland, for instance, the creation of entrepreneurship has relatively higher priority.

Regarding nature preservation, there is an important notion on history. Traditionally in many EU member states, areas chosen for nature protection have remained in the same possession as they were prior to their preservation.

In Finland, on the contrary, such areas have been purchased and taken care of by the State. With the EU paradigm of nature protection, private landowners will carry more responsibility, and the acceptance of the programme among landowners has consequently been quite slow and arduous.

Simultaneously, there is an essential shift from preserving areas within strictly defined geographical boundaries to preserving habitats and ecological entities.

The employment effects of the European environmental programmes and their funding seem to be positive, but primarily small scale in a local perspective.

In general, environment-conscious methods tend to be more labour-intensive; in that sense it is safe to say that there is a positive effect. This goes equally for the care and the restoration of natural or built environments. However, scepticism was also expressed on whether there in reality has been any employment effect: evaluations have not unambiguously supported the assumption: the impact of environmental projects on employment as a whole was disputed. It is difficult to say whether the employment effect would have been different had environmental measures been implemented with national funding only.

Employment is one of the criteria, although not a major one, in the evaluation of environmental projects.

Legislation

Since joining the European Economic Area treaty in 1994, Finland began actively to harmonise its legislation with the EU, but not yet in the field of nature preservation. Now, the harmonisation process occupies a major share of the legislative resources.

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Presently, there is hardly any capacity for making specific national laws and regulations regarding the environment, but perhaps there is no need either. The Water Framework Directive, for instance, is expected to keep the administration busy for years to come, although there already exists corresponding national legislation.

There are, however, numerous examples of directives that can be implicated only with difficulty in Finland, whether for ecological or societal reasons. Still, it seems that Finnish authorities often go to lengths to translate them into Finnish law as literally as ever possible. Many regulations seem quite irrelevant even to the ministry experts, not to speak of the public.

Some well-publicised disputes (regarding e.g. recycling of glass bottles) have indicated that for Finland, certain European directives risk being a step backwards environmentally.

One view was that perhaps environmentally Finland hasn’t actually benefited profoundly from the EU membership, because Finland already was active in the field before 1995.

But on the whole maybe the membership in the EU still has given a sort of ‘backbone’ to environmental action.

Investments

For instance, the VOC (Volatile Organic Compounds) directive has imposed relatively heavy, non-subsidised investments on small and medium-sized enterprises. The issue is that these compounds, although they have an impact of lower atmosphere ozone in more southern climates, do not have the same effect in Finland, and therefore there hadn’t been any legislation regulating them.

In agriculture, on the other hand, investments as a rule have received public co- funding. There is a clear trend towards larger units in agriculture, certainly not uniquely caused by EU funding, but perhaps accelerated by it.

Because of the northern, cold location of Finland, and also because of the structure of big industry, the consumption of energy per capita is relatively high, which gives problems in achieving norms for air pollution without additional extensive investments, although much already has been done.

The implementation of Natura 2000 will require public investment, too.

Specific programmes

The separate programmes administered (or co-administered) by the Ministry of the Environment were more extensively discussed with the official(s) in charge of that particular funding.

LIFE Nature

From 1995 to this date, Finland’s share of the LIFE Nature instrument has been 27 million € and about 30 projects relating to the implementation of the Natura 2000 network. Many of these have included land-use planning. For the Natura 2000 network, i.e. the preservation of biodiversity, this instrument, in spite of these limited resources, has been the

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Because the Finnish Natura 2000 network concentrates on areas in their natural state, such as virgin forests and swamps, it only to a lesser degree receives agri-environmental support. However, in the relatively scarce cases of maintenance and restoration of traditional agricultural nature types, the support plays an important role in preserving endangered species and biodiversity.

LIFE Environment

Finland has had good success in LIFE Environment calls. In part, this may be due to the fact that the Finnish research community in academia and industry already before the EU membership had good experience of collaborating across organisational as well as national borders; also, there is a strong research tradition in general. The existence of an active low- hierarchy network of researchers within which there is dynamic flow of information is a factor that works in favour of ‘win-win’ activities such as setting up joint projects.

Judging from the quantity and quality of the projects with Finnish participation, these projects have been relevant in a European perspective.

Agricultural funding

In agriculture, decisively more has been achieved from an environmental viewpoint since the EU entry. Among farmers, the environmental side of agriculture was not much of a discussion subject before 1995.

At least from the point-of-view of the Ministry of the Environment, the adopted versatile horizontal approach to environment in agriculture seems to function very well and it accounts for water and air protection, native domestic animal races (there exist both Finnish sheep, lamb, horse, cattle and poultry). Environmental compensation covers 90 % of the geographical area. One can safely say that nowadays the concept of biodiversity and the reasons for protecting e.g. meadows and traditional landscapes are common knowledge.

The general climate in agriculture has become more open to environmental issues. Partly this seems to be due to the simple fact that there is more money available; also, environmental aspects need to be taken more into account than before. Of course, it could be argued whether the trend would have been the same without the EU membership, but still, it seems that at least in some areas much has been achieved that would not even have been considered before.

However, a critical voice noted that perhaps the changes, profound as they are, have been mainly on the level of attitude; and they are yet to be transformed into concrete action.

Another general notion is that bureaucracy has increased immensely, both for the public and the private sector, and most so in agriculture and other primary production.

In agriculture, the horizontal programme of environmental support reaches 95 % of the funding and 90 % of the geographical area. Consequently, a very essential part of the agricultural support is agri-environmental support, which therefore is an important source of

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Since the EU entry, national agricultural funding has had more of an auxiliary role, but even national complementary support is subordinated to Brussels approval.

Structural funding

In the Objective 1 and 2 regional funds, 20 percent of the projects are to have an environmental dimension; for Southern Finland the percentage is 30 (due to heavier land usage). Obviously, however, structural funding as a whole plays a much more important role in several other member states.

Needs are different in different parts of Finland. In Eastern and Northern parts, the population is scarce and diminishing; there is a relative abundance of uncultivated nature, whereas in Southern Finland, the population is ever growing and in many places causes quite a pressure on nature.

Mid-term evaluations suggest that the Finnish Objective 1 and 2 programmes have worked positively for the environment. The initial opposition of in particular agricultural producer groups to the EU paradigm of nature protection has, however, resulted in nature- oriented projects being stalled or not implemented.

The most profound changes in environmental policy addressed were that the life-span awareness regarding products is on the rise. Another noted that the biodiversity aspect has been generally accepted, in nature conservation as well as in agricultural environments.

A profound change affects the principles for nature preservation, where private landowners become responsible for preserving their land to the extent it is affected by preservation schemes.

Environmental assessments would seem to become ever more important in the future. The SEA (‘Strategic Environmental Assessment’) directive is presently being introduced into Finnish legislation, and it might be an efficient tool for monitoring environmental politics.

A critical note was also made that the emphasis on innovative approach in e.g. projects has not necessary been only beneficial, as there is a great risk of focusing on novelty for novelty’s sake. Environmentally, traditional methods after all often have proven to be the truly sustainable ones.

Another point was that the often critical and pioneer voice of the Nordic Countries has become less powerful internationally since Sweden and Finland joined the EU; now it is carried by Norway alone.

Still, what is important, the general attitude towards environmental issues has turned to the positive.

And probably much has been achieved which would not even have been considered had there not been European programmes available.

Last but not the least, the increase of interaction and collaboration between organisational branches has been perceived as very positive, and it may well have future spin-off impact beyond immediate needs.

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5 COORDINATION

There has certainly been a lack of coordination of community policies in the initial phase of the programming period starting at 1995 when Finland entered the EU. The situation has changed and especially during the recent years coordination exists and is even promoted. Many of the authorities interviewed addressed increased co-operation as one of the main positive experiences.

There is, however, a risk for overlapping of activities, which also was addressed in some interviews. This could be the case in situations where regional cohesion is strongly promoted and many financial bodies and regional development bodies focus their activities and efforts to one certain field in a region. On the other hand concentration often boosts growth and development, which has been addressed in evaluation reports.

The overall impression regarding regional development in particular is that a positive development trend is on course and at least at national level – but most probably also at regional level – awareness has been raised concerning the importance of co-ordination and many steps taken as well to improve the co-ordination. The regional management groups have functioned well and fostered a totally new management culture as well as increased the co-operation and partnership – even involving new actors and women in the management.

RECITE II: Women entrepreneurs in Northern Karelia In Northern Karelia, a huge and sparsely populated region, women are particularly affected by employment. As they generally devote themselves to their families, their contribution to the political and economic life of the region has been relatively small.

The Association of Women Entrepreneurs of Northern Karelia is aiming to reverse the trend by fostering natural talent and by creating jobs and opportunities. With funding from the Recite II programme, the Association established a centre at Joensuu, the capital of the region, which assists women along their entrepreneur pathway. Employing 20 women the Karelli Centre operates mainly as a support and contact network, which is very useful in the isolated areas. Among other things, it provides training, offers advice, organises fairs and supplies information.

The aim of all this is to facilitate any steps taken by the women. The centre also launched an awareness-raising campaign, which through various panels and workshops has enabled the specific contribution made by women to the social and economic life of the region. This has been effective on awakening interest, encouraging recognition, promoting regional cohesion and, in sum, influencing attitudes.

Total cost of the project was 362 907 € of which the EU contribution was 272 180 €.

A special feature in East Finland was that during the passed programming period Ob 6, Obj 5b, Obj 2 programs were implemented at the same time in the region. The objectives and measures were not always coherent and there were huge problems to create meaningful project entities. At present the Obj 1 program covers the entire region and makes project implementation much easier.

Another issue that was addressed by some interviewees was that the ESF Community Initiatives were a bit problematic to handle though co-ordination existed, the Ministry of Labour being in charge of ESF as well. The problems encountered at local and regional level were due to the fact that the reports at national and regional levels concerning the initiatives

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In rural policy, from an administrative viewpoint, the most challenging aspect has been to coordinate measures of different funding bodies and different programmes.

A problem has been that the organisational structure for administering and supervising the funding of agricultural policy has been poorly suited for matters of rural development, for instance. Another is that the slow start of the present programme period there has in reality resulted in a two-year break in the funding of local rural development.

Under Objective 1 through the EAGGF, basically the same measures are supported as via ALMA, with the addition of structural investments in agriculture. Since Objective 1 is a programme that integrates several sources of funding, it should – at least in theory – be smooth to coordinate the projects of rural development.

In areas falling under Objectives 2 or 3, the ALMA programme is coordinated through regional authorities. At least in principle, these objectives include the potential of promoting rural entrepreneurship and competence, but practical implementation varies from one region to another.

6 GOVERNANCE ISSUES

The model of governance in Finland is more or less unique in Europe. Many different authorities at national, regional and local level deal with Community Policies. This model fragments the actions. It is hard to create project entities with real impact regarding employment, entrepreneurship. Instead a broad variety of different projects have been created.

When Finland entered the European Union all actors involved in regional development had to adopt a totally new approach and new working methods. The methods that the programming work required were very much different from the methods used. The ministries were not used to co-operation on a broad base horizontally in planning and implementing regional development. Their experience was limited to vertical co-operation. This was also the situation at regional level. The new situation forced the authorities into closer co-operation. The distribution of power in decision making also changed. The regional planning, putting the plans into practise as well as division of tasks changed at the same time.

This is the main reason for the delayed process in the initial phase, also the number of reforms during a limited time caused delays. The situation could have been better if training would have been put into practise before the process started. The lack of experience, practice and know how caused problems to the entire administration – as well as to regional and local actors who were supposed to deliver project ideas and plans.

It took some time until the authorities realised that they needed personnel resources in order to be able to carry out the work. Due to the lack of experience directives had to be changed several times, which also delayed the implementation of the programs. Monitoring of the process was poor in the initial phase, gathering of statistical information was not always organised in a proper way, which affected the evaluations. The difficulty to measure the impact on employment in number of created jobs was merely up to the project managers to assume.

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Involving new actors in a process that is not familiar to anybody, is hard – many projects suffered from this in the beginning. The bureaucracy was heavy, reports had to be rewritten, the systems of payments and requisitions of payments as well as the monitoring were new issues to everybody.

The poor understanding of the bottom up principle also caused problems and that is why there were not many actors in the beginning. On the other hand, the administration was not able to inform, involve, advise nor activate new partners. Instead the public sector units, like universities and other training units became very active. Nowadays many projects are run by the financing body itself.

These problems have mainly been solved during the second phase of the previous and during the new programming period. But according to our informants the Finnish administration – obviously influenced by the EU administration – has created a rigorous bureaucracy, which recently has started to affect the actors and decreased their interest in getting involved in projects. Even though many things have developed ad become better there is still a lot to do if the community policies shall be put into practise at regional and local level with a bottom up approach. The delivery of financing is still a long process, small actors have problems with cash flow, the management is a complex process and the monitoring is often focused on tracking cents and crooks.

The European programmes have imposed collaboration, but on the other hand, a genuine quest for cooperation has emerged within a spectrum of players (entrepreneurs, the educational sector, research, developers, etc). Thanks to the programmes, new forms of cooperation and collaboration have evolved – one might even say that this has been their most fruitful outcome.

7 CONCLUSIONS

To assess the impact of Community Policies on regional cohesion was not an easy task due to the fact that the state ad regional administration in Finland is complicated and fragmented. The state and regional administration and the responsibilities for delivering funding is decentralised, but there are far too many boundaries crossing the regions and making the implementation of broader projects very hard. The State has its own regional and local administrations but the regions covered are not similar to those responsible for regional development. For the report of East Finland 4 Regional Councils, 2 Provincial Governments, 4 Employment and Economic Development Centres and 4 Environmental Centres were contacted for information. It was not easy to obtain quantitative information on NUTS II level. However, the problem is identified and some authorities have created systems, which enable data collection at that level.

The regional identity is very strong at NUTS III level in East Finland and the impact of the Community policies can clearly be identified at that level. There is no such identity at NUTS II level, nor are there structures or administrations to support the development of such an identity in East Finland. Furthermore, to some extent the borders between NUTS II areas contradict those of the historical provinces of Finland. The real cooperation of the regional councils at NUTS II level is weak and merely technical, while the co-operation between certain regions and many sub-regions is strong. That is why it is extremely important to notify and respect the differences between the regions in the programming phase and when strategies at NUTS II level are drawn up.

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The overall impression is that the impact of the Structural funds and regional policy funding, the Common Agricultural Policy and the Environment Policy has been strong in East Finland. Without subsidies the Finnish Agriculture would not survive. The decrease in both the agricultural units and their incomes has developed the fastest in Eastern Finland. The transition to the environmental legislation of the EU has clearly been the biggest change and it shows a very significant impact on the agricultural trades and industry in Finland.

The out-migration is continuing – young people and women tend to leave the region – and the unemployment rate is still high, in some municipalities the highest in Finland.

The Structural Funds, Community Initiatives and national funding for regional policy have been very important for the region and enabled to handle the structural changes and create employment where jobs have been lost. The impact of the Obj 6 program has been crucial in East Finland in order to maintain and restructure agriculture. The volume of the program was however not sufficient enough for changing the operational conditions. Enhancing employment is not enough as long as new enterprises are not founded. ESF measures as well as national employment measures have been directed to the regions as well as Equal – but the impact on employment is still weak. According to key informants it could be wise to focus on R&D and State Aids in order to develop the companies operating in the region and speed up the export efforts in order to create new jobs.

Also the cross border programmes and the trans-national parts of the community initiatives have broaden the views of actors and brought new innovative elements in the local and regional development.

The implementation of the CPs has clearly fostered the actors to co-operation and a new culture of management and decision-making is developed. However, there are still problems with the bottom up approach and involving non-traditional actors – and women – on the arena.

8 GUIDELINES FOR THE COMMUNITY ACTION

The contribution of CPs to social and economic cohesion could be improved by encouraging the regional actors to put more emphasis on strategic planning, obtaining and analysing updated and relevant information about different CPs. in operation in the region, the operational conditions in the region as well as development trends.

Multiannual and bigger project entities should be created including development, investments and training, instead of having separate projects that might cause overlaps and have a negative impact.

Agriculture and rural development should not be treated separately, but as an entity. Regarding the national regional development strategy that focuses on strengthening the position of regional centres, remote areas and traditional rural areas should not be left behind.

It is obvious that the administrational culture and structures in Finland prevents the co-ordination of programs and in the end might decrease cohesion. It is important to create regional structures that support co-operation and co-ordination and improve the information about CPs. Benchmarking, dissemination of best practises concerning innovative ways of implementing programs and networking should be funded by new proposals.

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BIBLIOGRAPHY

- Interviews and questionnaires

- Ministry of Transport and Communications

- Ministry of Environment

- Ministry of Agriculture and Forestry

- Regional Councils of South Savo, North Savo, North Karelia and Kainuu

- Finnish Secretariat for EU R&D. Technology Development Centre (TEKES)

- Regional Environment Centres of North Karelia and Kainuu

- The Central Union of Agricultural Producers and Forest Owners, MTK

- The Central Union of Swedish Speaking Agricultural Producers in Finland

Publications

- Luukkonen T, Hälikkä S, Niskanen O & Eela R (1999). Finnish Participation in the Fourth Framework Programme. Publication of the Tekes International Co- operation 4/1999.

- The Nordic Triangle – Development Programme for the Transport System in Finland. Brochure.

- Itä-Suomen tavoite 1-ohjelma 2000-2006 (2000). Ohjelmakuvaus. Sisäasianministeriö.

- Paths to the Future. The environmental programme of North Karelia until 2010. North Karelia Regional Environment Centre

- Objective 5b-program 1995-1999. Mainland Finland. Final report (2003). ARINCO N:o 95.FI.16.001. Ministry of the Interior, Division of Development of regions and administration.

- Objective 6-program 1995-1999. Final report (2003). No ARINCO : 95FI16002. Ministry of the Interior,.Division of Development of regions and administration

- Objective 2 program of Finland;1995-1996: Interim report (1997), Final report (1999) Ministry of the Interior

- Objective 2 program of Finland 1995 – 1999, Interim report (19918), 2nd interim report (1999), Ministry of the Interior

- ESF reports and evaluations, Ministry of Labour

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Web pages

- Cordis: Suomi EU-ohjelmissa. http://www.cordis.lu/finland/fi/home.html - Ministry of Transport and Communications: http://www.mintc.fi - Ministry of the Interior: http://www.intermin.fi - Ministry of Agriculture and Forestry: http://www.mmm.fi - Ministry of the Environment: http://www.ymparisto.fi - Ministry of Labour: http://www.esr.fi - Ministry of Education: http://www.minedu.fi - Ministry of Trade and Industry http://www.ktm.fi - Environmental Administration: http://www.vyh.fi - The European Commission Representation in Finland: http://cgi.eukomissio.fi - The European Union: http://europa.eu.int - The Central Union of Agricultural Producers and Forest Owners: http://www.mtk.fi - The Central Organisation of Swedish Speaking Agriculture Producers http://www.slc.fi - The Village Action Association of Finland: http://www.maaseutuplus.fi - Suupohjan kehittämisyhdistys ry: http://leader.suupohja.net - Ministry of Labour: http://www.mol.fi - Equal: https://equal.cec.eu.int/equal/jsp/index.jsp - Finnvera http://www.finnvera.fi - TEKES http://www.tekes.fi - Statistics Finland http://www.tilastokeskus.fi - Each Regional Council concerned, universities, T&E-centres etc.

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APPENDIX

Index of tables included in ANNEX II

FIMOS (Finnish Monitoring System), Monitoring Database for EU Structural funds objectives. Maintainer: The department of regional refunds, Ministry of the Interior, Finland Objective -programs Interreg R&D Innovation (TEKES – National Technology Agency of Finland) Regional State Aids

Ministry of Agriculture and Forestry CAP (includes LFA, environment and national funding)

Ministry of Transport and Communications Finland TEN

http//europa.eu.int/comm/environment/life/projects LIFE

Regional Council of Päijät-Häme Regional Council of South Karelia Regional Council of North Karelia Regional Council of Kainuu Regional Council of Häme Leader, SME, Pesca, Recite, Innovative Actions

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SUOMI / FINLAND:

REGION: ETELÄ-SUOMI

ELABORATION:

Author: Margita Lukkarinen Collaborator: Laura Flinkkilä

From: Oy Coop Consult Ab Kokkola Finland

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF ETELÄ-SUOMI. FINLAND

EXECUTIVE SUMMARY

South Finland consists of five different regions and five Regional Councils in charge of regional development and spatial planning. The regions of South Finland are members of two different provinces and three regional Environment centres. There are three Regional Employment and Economic Development centres operating in South Finland.

The fact that there are many regional actors covering the territory in different ways makes it very difficult to assess the impact of community policies due to many boundaries. The qualitative information is difficult to obtain at NUTS II level as is the co-ordination of policies.

The region of South Finland is located in southern Finland near the capital city area and covers the area from the archipelago in west to the Russian border in the east. The western part of South Finland has good sea routes to Sweden and Europe via the Baltic Sea. The easternmost regions are the gateway to Russia and St Petersburg. The international airport of Helsinki-Vantaa is also within a few hours at the most from anywhere in South Finland.

The population density is 32 persons/km2 while the average is 15 persons/km2 in Finland. No common unemployment rate for South Finland can be found, but in general the unemployment rate is rising when moving towards east. Most of the regions stand well in comparison to the whole country when measuring the GDP.

The main CPs are with major impact on the regional cohesion in South Finland are Regional policy, CAP and Environment.. In South Finland where most of the farms are situated the main product is grain, in fact 40 % of all the bread grain in the country comes from this region. The impact of CAP has changed the conditions for farming dramatically. In South Finland the decrease of farms is more or less 10 000 after Finlands entry into the EU.The agri-environmental support has proved to integrate well into Finnish agricultural scene since more than 90 % of the farms are registered for agri-environmental compensations.

The Obj. 2-program as well as the Obj 5b-program were important instruments in order to meet specific needs in the region. In some regions the Obj. 2-program had clear impact on the most relevant indicators in the region: population, employment and jobs. The co-ordination of programs as well as governance should be improved..

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GENERAL INDEX

1 COMMENTS ON THE ACTIVITIES

2 CONTEXT AND BACKGROUND

2.1 BASIC DESCRIPTION OF THE ADMINISTRATIVE FEATURES 2.2 BASIC DESCRIPTION OF THE REGION

3 MAIN CONNUNITY POLICIES 3.1 REGIONAL POLICY 3.2 AGRICULTURE AND FORESTRY 3.3 FISHERY 3.4 ENVIRONMENT 3.5 STATE AID 3.6 OTHERS

4 ASSESSMENT OF THE IMPACT: MAIN RESULTS

5 COORDINATION

6 GOVERNANCE ISSUES

7 CONCLUSIONS

8 GUIDELINES FOR THE COMMUNITY ACTION

BIBLIOGRAPHY

APPENDIX

Index of tables included in ANNEX II

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1 COMMENTS ON THE ACTIVITIES

The activities have been carried out between April and mid-June 2003. The gathering of information was mainly carried out in May.

The collection of data has been very complicated due to the fragmentation of the information requested, the areas of the various programmes being different from the areas to be studied: the authorities dealing with the programmes seldom cover precisely NUTS II regions.

The quantitative information on Structural Funds was easy to obtain while information on Community Initiatives and other Community Policies implemented at NUTS II level was difficult to get. It was almost impossible to assess the impact of the policies without going into the very projects carried out by region, which would have requested months of additional work.

The collection of quantitative information has mainly been done by using available databases and by asking officials at the ministries to provide the information at NUTS II level. It should be notified that the figures obtained do not necessarily correspond to figures obtained from evaluation reports. Some of the information turned out to be strictly confidential, priced and not available until after negotiations with high officials. A lot of efforts were put into adding quantitative information at NUTS III level together in order to be able to report at NUTS II level. It was also difficult to report on those Community Initiatives and other CPs, which were on a major scale and implemented in multiple regions or nation- wide.

Much information was also obtained from reading area descriptions as well as policy and strategy documents at regional level. Most CPs from the previous programming period had been evaluated or at least there were mid-term evaluations available. Some regions had made own enquiries concerning the CPs; programming, implementation, coordination and lessons learnt.

The qualitative data on ESF and ERDF was obtained from a series of evaluation reports but the quality of some of these was quite weak, therefore interviews with key informants were needed. Some evaluations were more descriptive than evaluative, so it was important to interview actors at national, regional and local level. High officials from the ministries and special interest groups as well as officials at regional level were interviewed personally, face to face, over the phone or through enquiries (all Regional Councils and regional environment offices concerned).

Due to the complicated structure of regional development in Finland, there was a clear demand for interviews with actors at different levels in order to get a comprehensive picture of the situation and of the nature of cohesion.

The interview methodology was based on theme interview method, which is one of the most usual interview methods used when gathering profound qualitative information. It is half-structured method which means that while the informant is encouraged to speak freely on certain themes, the interviewer is enable to follow a certain beforehand defined theme list. The themes used on this study were based on secondary data and on the study objectives.

List of interviews and key informants:

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Ministry of the Environment: in-depth interviews with five Senior Advisers and higher officials at the Land Use Department and the Environmental Protection Department (21.5.03; 27.5.03; 5.6.03); shorter or general-level telephone interviews with several senior officials (12.5.03; 15.5.03; 20.5.03).

Ministry of Agriculture and Forestry: 3 in-depth interviews with different Senior Advisers at the Department of Agriculture (12.5.03, 21.5.03, 26.6.03) shorter or general-level telephone interviews with several senior officials (16-18.6.03).

Ministry of the Interior Telephone- and e-mail interviews and enquiries to senior advisers (april – august 2003)

The Central Union of Agricultural Producers and Forest Owners (MTK): in-depth interview with a top official (23.6.03).

The Central Union of Swedish-speaking Agricultural Producers in Finland (SLC): In-depth interview with an official (22.5.03)

Ministry of Transport and Communications Finland: telephone interview with a Senior Adviser. (21.5.2003)

Finnish Secretariat for EU R&D. Technology Development Centre (TEKES): telephone interview with an Adviser. (15.5.2003)

Numerous phone calls and emails to regional actors (Regional Councils, Regional Environment Centres, Regional Employment and Development Centres) during April - June

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2 CONTEXT AND BACKGROUND

2.1 BASIC DESCRIPTION OF THE ADMINISTRATIVE FEATURES

The regional administration in Finland is formed on one hand by state administration at regional level and on the other by regional administration as part of local self-government. The state regional authorities carry out tasks assigned to them by the central government at the regional level as well as steer the activities of the state local administration.

The most prominent authorities of the state regional administration are the Employment and Economic Development Centres, the State Provincial Offices, the Regional Environment Centres and the road districts subordinate to the Finnish Road Administration. The Employment and Economic Development Centres aim to promote business and regional development. The State Provincial Offices act as general administrative, supervisory and security authorities at the regional level. There are six State Provincial Offices in Finland, five on the mainland and one for the autonomous islands of Åland (Ahvenanmaa).

There are 19 Regional Councils in mainland Finland. These are statutory joint municipal boards acting according to the principles of local self-government. They function as regional development authorities and aim to promote the independent and equitable regional development of different parts of the country. Moreover, they are responsible for the general planning of regional policy and its implementation as well as for the international contacts of their respective region.

Sub-regions are defined mainly on the basis of employment and cooperation between municipalities. There are 79 sub-regions on the Finnish mainland. Parameters representing regional development are monitored at sub-regional level.

The number of municipalities in Finland is 446. The municipalities have a dual function. Firstly, they function as the basic regional administrative units of our country, and secondly as the basic units of the self-government of the citizens. The municipalities play a central role in society through organising most of the welfare services. Within the central state administration, municipal affairs are administered through several ministries.

2.2 BASIC DESCRIPTION OF THE REGION

2.2.1 Regional actors

The regional administration in Finland is formed on one hand by state administration at regional level and on the other by regional administration as part of local self-government. The state regional authorities carry out tasks assigned to them by the central government at the regional level as well as steer the activities of the state local administration.

The most prominent authorities of the state regional administration are the Employment and Economic Development Centres, the State Provincial Offices, the Regional Environment Centres and the road districts subordinate to the Finnish Road Administration. The Employment and Economic Development Centres aim to promote business and regional development. The State Provincial Offices act as general administrative, supervisory and security authorities at the regional level. There are six State Provincial Offices in Finland, five on the mainland and one for the autonomous islands of Åland (Ahvenanmaa).

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There are 19 Regional Councils in mainland Finland. These are statutory joint municipal boards acting according to the principles of local self-government. They function as regional development authorities and aim to promote the independent and equitable regional development of different parts of the country. Moreover, they are responsible for the general planning of regional policy and its implementation as well as for the international contacts of their respective region.

Sub-regions are defined mainly on the basis of employment and cooperation between municipalities. There are 79 sub-regions on the Finnish mainland. Parameters representing regional development are monitored at sub-regional level.

The number of municipalities in Finland is 446. The municipalities have a dual function. Firstly, they function as the basic regional administrative units of our country, and secondly as the basic units of the self-government of the citizens. The municipalities play a central role in society through organising most of the welfare services. Within the central state administration, municipal affairs are administered through several ministries.

2.3 BASIC DESCRIPTION OF THE REGION

2.3.1 Regional actors

The Nuts II level region South Finland (FI12) consists of five regions and therefore also five regional councils (see Map 1): Southwest Finland (number 2 on that map), Häme (5), Päijät-Häme (7), Kymenlaakso (8) and South Karelia (9). The regional councils are in charge of regional development and planning. They also coordinate the decision-making concerning structural funds channelled to all regional actors. The regional councils also distribute Objective 2 funding in the region.

Map 1. Regions in Finland Map 2. Provinces of Finland

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Besides the 19 regions (the self-governmental area of the Ahvenanmaa islands excluded), mainland Finland is also divided into five provinces (see Map 2). The regions of South Finland are members of two different provinces. Southwest Finland is part of the Province of Western Finland (Länsi-Suomen lääni), whereas Häme, Päijät-Häme, Kymenlaakso and South Karelia belong to the Province of Southern Finland (Etelä-Suomen lääni). The provincial State offices of Southern Finland and Western Finland have the responsibility to distribute that ESF funding which is channelled via the Ministry of Education.

The Ministry of Trade and Industry, the Ministry of Agriculture and Forestry, and the Ministry of Labour have jointly combined their regional forces in the Employment and Economic Development Centres (T&E Centre). South Finland has three T&E Centres (see Map 3): The region of Southwest Finland has its own T&E Centre of Varsinais-Suomi (numbered 2 on that map), the T&E Centre of Häme covers the regions of Häme and Päijät-Häme (4), and the T&E Centre of Southeast Finland (6) is operating in the regions of South Karelia and Kymenlaakso. The tasks of the T&E Centres include functioning as a specialist and a contributor of EU funding. Each T&E Centre also develops EU co-operation in its own area.

Map 3. Employment and Economic Map 4. Regional Environment Centres Development Centres (T&E Centres)

Environmental issues are dealt regionally in thirteen Regional Environment Centres (see Map 4), participatory and guiding authorities whose task is the assurance of the prerequisites of sustainable development in the region. Three Regional Environment Centres are operating in South Finland: These are Southwest Finland (number 2 on the map; the region of Satakunta which is part of West Finland is also part of this REC), Häme (3; Häme region and Päijät-Häme region) and Southeast Finland (5; Kymenlaakso region and South Karelia region)

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2.3.2 Area description

South Finland is formed by five very different regions. It is located in southern Finland, north of Uusimaa region, and covers the area from the archipelago of Southwest Finland in the west to the border of Russia in the east. The whole of South Finland has a very favourable location near the Uusimaa region and the capital city area, which is considered to be the centre of Finland. The western part of South Finland is by the sea and has good sea routes to Sweden and to the rest of the Europe via the Baltic Sea. The easternmost regions, on the other hand, are the gateway to Russia and St. Petersburg. The international airport of Helsinki-Vantaa is also within a few hours at the most from anywhere in South Finland.

South Finland has 1,136,184 inhabitants (12/01). Its surface area is 35,642 km² of which 11.1 % is covered by water (the sea not included). The population density in South Finland per km² is 32. The average for Finland is 15 persons/km².

No common unemployment rate for South Finland can be found. Regional T&E centres provide the rates for Southwest Finland, Häme and Southeast Finland. In general can be said that the unemployment rate rises when moving towards east: the unemployment rate for Southwest Finland is 10.2 %, for Häme 12.7 % and for Southeast Finland 14.8 % (02/2003). In the 1980s, Finland had practically full employment, the unemployment rate being 3.2 % in 1990. During the depression in the early 90s, the unemployment rate in Finland went up to 16.6 % but has now come down to 9.1 % (2002).

Most of the regions in South Finland stand quite well in comparison to the whole country when measuring the GDP. When the computational figure for the whole Finland is 100, is the figure for Southwest Finland 99, Kymenlaakso 102 and Etelä-Karjala 99 (12/2001). Kanta-Häme and Päijät-Häme stay behind with rates of 76 and 80. Portions of each region are, however, included in the Southern Finland Objective 2 Programme.

The nature of South Finland offers a lot of variety. The landscape varies in topography, featuring a multitude of different types of forests, lakes, ridges and a unique archipelago. Mainly the environment is in good condition. However, transportation and the biggest industrial and energy plants have negative effects on their local surroundings. Also, small lakes and seashores suffer from over-fertilization

2.3.3 Special features in each region

Southwest Finland

The region of Southwest Finland is the westernmost region in South Finland. It is known for its unique archipelago and history. The first university of Finland was established in Turku, which is also the centre of the region.

Southwest Finland has very favourable conditions for agriculture, which together with shipyard, food, electrical engineering and vehicle industry is one of the most important sources of income.

The region of Southwest Finland is the third biggest region in Finland when comparing population (449,000 in 12/2001). The educational level is average even if the population increase consists of mostly students and unemployed.

The archipelago is a special area with small municipalities, two languages (Swedish and Finnish), sparse population, difficult connections and economic stability. The economical

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Häme

The Häme region includes three cities and thirteen municipalities. It is located in the triangle between the three most important cities of Finland, and provides good ground connections to each quarter.

The landscape varies from lakes and forests to fields and ridges. Natural resources are forests and groundwater as well as soil and rocks. The environment is well preserved and there is no major industry that would burden it.

A variety of industrial sectors are represented in the region, such as wood, furniture, food, metal and machinery. A problem is that the majority of the businesses are very small with only a few employees. As most of the regions in Finland, also the Häme region is suffering from migration and ageing of the population.

Päijät-Häme

Päijät-Häme region and its centre, the city of Lahti, have grown to the crossroads of Helsinki-St Petersburg railway and the waterway to central Finland. 90 % of the inhabitants live and work in the urban areas of Lahti and Heinola.

The landscape is very varied. The third largest lake of Finland, Päijänne, dominates the region and is an important drinking water reservoir for the whole of Southern Finland. The city of Lahti on the other hand is built on a ridge area, which is on top of a remarkable groundwater reservoir. These factors need also special attention when preventing environmental hazards.

The Päijät-Häme region is an important industrial area concentrated to ready-made products such as furniture, clothes, food, packing products etc. When the Soviet Union collapsed, it had severe effects to the historical bilateral trade that Finland and Soviet Union had had for decades. Due to that development, the Päijät-Häme region lost thousands of jobs from the basic industry. Many of the unemployed are also low educated people from the countryside who had moved to the Lahti area in the 1960s and 1970s to work in the industry. After the depression in the 1990s, those jobs were lost. The educational level is low also due the migration of young educated people.

Kymenlaakso

The Kymenlaakso region is situated in southeast Finland. Characteristic for the region are the wood processing industry along River Kymijoki, the harbours of Kotka and Hamina, and the lively border crossing station (to Russia) of Vaalimaa.

Environment and nature are affected by dense network of roads, intense agriculture and forestry, and closeness of industrial plants of Russia and Estonia. Special attention must be shown to the river Kymijoki, Gulf of Finland and the ridges of Salpausselkä.

South Karelia

The region of South Karelia is a gateway to Russia for Finland as well as for the rest of the EU. Close connections (roads and railways as well as water and air traffic) enable

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South Karelia is a region of forests and lakes. 10 % of the forestry in Finland is located in the South Karelia region. That is also the biggest strain for the environment. Pollution from Russia and Estonia also has effects in the nature, which is, however, in a fairly good condition.

The South Karelia region is suffering from migration, high unemployment and ageing. Most of the work force is in the service sector, one third works in the industrial sector. Wood processing industry and logistical services are the most important export businesses.

3 MAIN CONNUNITY POLICIES

3.1 REGIONAL POLICY

Regional policy aims for balanced regional development throughout Finland. Together, the national regional policy and European Union regional policy form a whole, which promotes the equitable and independent development of different parts of the country while also supporting less developed areas. For this purpose, Finland has adopted a programme- based regional policy and a system of graduated regional support for business and industry according to a geographical breakdown of aid areas.

The Ministry of the Interior's Department for Development of Regions and Public Administration manages regionally defined programmes of European Union regional and structural policies, the European Regional Development Fund (ERDF), the Interreg and Urban Community Initiatives in Finland. The Regional Councils act as regional development authorities in the regions.

Projects related to EU enlargement, for example Phare Twinning, are also important in view of regional development.

The aims of national regional policy and the measures taken to implement them are confirmed in the regional policy objective programme accepted by the Government. These include the Centre of Expertise Programme, Regional Centre Development Programme, sub- regional cooperation, urban policy, rural policy and development of the island areas. In addition, projects are under way to revise regional legislation and the regional development strategy, to relocate the activities of the State and to increase the efficiency of business aid.

3.1.1 EU policy

EU financing is sought from the authorities operating in the area, usually from the Regional Council, the Employment and Economic Development Centre, the State Provincial Office or the Regional Environment Centre. Applications should list the project goals, and include a cost estimate, the need for financing and a project plan. Management and reporting of EU projects proceed in accordance with strict rules.

The starting point in the planning of a EU project consists of four principles: concentration, partnership, added value and programme orientation. The project has to be

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ERDF

Objective 2 (Päijät-Häme, Kymenlaakso)

Four sub-regions in Etelä-Suomi belong to the Objective 2 programme: Lahti- Heinola in the Päijät-Häme region, Vakka-Suomi in the Varsinais-Suomi region, Kotka- Hamina in the Kymenlaakso region and Lappeenranta-Imatra in the Etelä-Karjala region. The sub regions have suffered from recession in industry and the unemployment rate has been high in the regions. The Obj 2 programme consists of three fields of action:

- increasing the entrepreneurship - developing skills and technology - developing the infrastructure, environment and culture

In Vakka Suomi the focus on the Obj 2 programme is support to enterprises (65%). Supporting investments is a central means and its share of the total investment aid to companies is 89 %. Out of the total amount of funding from TEKES the companies share is € 0.52 million and the share of the research institutes is only 0.6 %. The role of programme based development work is of minor importance. During 97–99 there was a strong focus on infrastructure-oriented projects when the share of training and development projects decreased to be only 15% of the total funding.

This is mainly due to the fact that there are not too many companies, which are interested in development actions, instead the projects have been created and offered by training organisations and a true co-operation and connection to companies has lacked.

As a result of the export and internationalisation projects the competitiveness of the companies has clearly increased.

In Päijät-Häme region the share of support to companies was 44% of the total frame of the Obj 2 programme 1995–1999 (€ 49.2 million). In 1995–1996, big infrastructure projects were funded, but in 1997–1999 the number has clearly decreased being now 10% of the frame. Compared to other Obj 2 areas the companies have got more support to internationalisation projects than in Obj 2 regions in general. This goes also for investments in the metal, wood and electronic branches. However, the impact on employment is limited to maintaining existing jobs.

The R&D projects funded by TEKES (€ 5 million) have mainly focused on product development. The companies have addressed the importance of the aid when developing new products.

The impact on employment has been significant in Päijät-Häme: a thousand new jobs have been created as a result of the Obj 2 program.

In Kymenlaakso the Obj 2-funding frame is € 24 million. In the beginning of the programming period the share of public infrastructure projects was very big, 70%. The share of aid to companies in the latter period was 16 %, lower than average in Obj 2 regions. This is due to the fact that Kymenlaakso was not eligible for investment aid. Almost all of the TEKES funding (€ 1.24 million) was directed to projects in companies. The minor share of TEKES research projects relates to the fact that there is no university in the region.

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The geographical circumstances have strongly highlighted the importance of cross border co-operation with Russia. However, regarding to the fact that 11 million FIM was directed to those projects and the ambitions were very high the results have been poor. The partners did not have possibilities to participate in the projects in an expected way. Even though the logistics is a very important field of development it is obvious that the impact of the Obj 2 programme on developing the logistics in Kymenlaakso is poor. The projects in the ports of Hamina and Kotka are of major importance and financially also very heavy (€ 8.4 million), but it seem impossible to measure the impact of the Obj 2 program, since the ports have been objects for development during a long period of time.

In Etelä-Karjala the financial frame of the Obj 2 programme was € 39.2 million and the projects funded formed a balanced entity. In the initial phase of the programming period the number and volume of infrastructure projects was 50% of the frame. Lappeenranta is part of the national centre of expertise program, which increases the amount of projects and the funding from TEKES (€ 3.5 million to companies and € 1.35 million to research institutes). The TEKES projects concentrated on energy and environment.

A central and typical field of development in Etelä-Karjala was to build and renovate venues for companies (38 million FIM). The Fair Centre of Imatra and the free port of Lappeenranta are both important investments as a part of the regional strategy to act as a bridge between the EU and Russia.

The Objective 2 programme has well met the needs in the specific regions concerned. Many new companies were founded as a result of the projects. During 1995–1999, 17,300 new companies were founded while 14,200 companies were closed down. As the main part of the new companies were based on the former companies the net growth of the amount of companies was limited to 3,100, which is 9 % of the total number of enterprises in 1994. The average growth was 11% in the whole country.

Regarding the number of new companies founded and the development of the employment the Obj 2 area has developed equally compared to the comparison regions, cities in South and Mid Finland. Compared to urban regions in Obj 5b and 6 the growth of employment has been even better. But compared to the employment development in the country as a whole, the situation is worse. The unemployment rate is higher and migration continues.

There are big variations among the regions concerning the creation and closing down of companies. Compared to other regions the creation of new enterprises was weaker in Päijät-Häme whereas Varsinais-Suomi can demonstrate an increasing number of new enterprises. The migration has decreased the unemployment rate in Varsinais-Suomi.

On the other hand in Varsinais-Suomi and Päijät-Häme the number of employed grew more than the national average during 1995–1999. This is mainly due to the growth of the industrial sector and the primary production. In Kymenlaakso and Etelä-Karjala the growth of employment was weaker. The decrease of the unemployment rate was very rapid in Varsinais-Suomi but the situation was the opposite in Kymenlaakso.

Objective 2 South Finland, 2000 - 2006

Finland carries out two Objective 2 Programmes during the programming period 2000– 2006. Objective 2 area in South Finland includes parts of the regions of Itä-Uusimaa, Uusimaa, Southwest Finland, Kanta-Häme, Päijät-Häme, Kymenlaakso, and South Karelia. There are 820,000 inhabitants in the area. Of the latter, 126,000 people are living in the area of Objectives 5(b) or 2 in the period 1995–1999. These regions get the transitional assistance until 2005, but do not qualify for the new Objective 2. The strategic emphasis is

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Information about the Objective 2 is handled at the entire Objective 2 area level. Information on areas specified in this study cannot be found.

Objective 2 is implemented in three action priorities:

Increasing attraction of South Finland and competitiveness of the companies.

Developing the level of know-how and human resources.

Securing the function and the comfortableness of the community.

The following information about the regions is gathered through questionnaires for the Regional Councils. Picture: The main focus of the Objective 2 Programme in Päijät-Häme Objective 2 area in is in developing know-how. According to official measures, Päijät- 2000 - 2006 Häme has thousands of new work places thanks to Objective 2 Programme. They have used especially ESR funding for training, because the level of education is low in the area. Training projects have been important for example because now their universities have created co- operations with other universities.

ERDF objective 2 and 5b:The Vakkaweb database: Promoting information society in southwestern Finland

The general downturn of the Finnish economy in the early 1990s proved to be difficult for the region and caused unemployment to increase dramatically. In order to remedy the local economic actors decided to launch the Vakkaweb database. The project lasted from March 1998 to February 2000.

In this sparsely populated region, the database functioned as a data network enabling local authorities, educational institutions, enterprises and remote workers to co-operate more efficiently. The project provided for example the necessary education and training for local entrepreneurs and farmers so that they could take advantage of the internet and use the various tools of the information society.

As a direct result of the project, several people have been hired to maintain information service contacts for businesses and individuals. In addition to fulfilling local needs and enhancing regional cohesion, vakkaweb project expanded it´s reach also to other countries in the Baltic Sea area.

Total cost of the project was 550 000 € of which the ERDF co-financing was 168 000 €.

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In Kymenlaakso, the main focuses have been in developing know-how and know-how structures, improving the foundation for operation in companies, logistics, benefiting the location, renovating culturally historical buildings for the use of companies. The Region Council of Kymenlaakso controls the Objective 2 Programme in the area. The benefits from the Objective 2 have been deepening the level of know-how when it comes to strengths in the area, getting new companies in the region, or at least transferring operations in the region from elsewhere. There are important centres (Vaalimaa as a service centre and Kouvola as a centre of railway logistics) in the region thanks to Objective 2 Programme. There are few examples of the benefits of the Objective 2.

In Kanta-Häme the main focuses have been in studying the line of business fields in the region, improving the know-how, and developing the attractiveness of the urban areas. The Objective 2 Programme made it possible to implement development projects. Also the central indicators, like population, employment, and work places, have developed positively during this programming period.

EAGGF

Objective 5b (Southwest Finland, Häme, Päijät-Häme, Kymenlaakso, South Karelia)

The main aim of the Objective 5b programme was to develop areas that are most sparsely populated and dependent on agriculture. The programme was directed to strengthen and diversify the actions of small and medium sized companies, to improve the competitiveness of agriculture, to broaden the basis of income for people in agriculture, and to develop the vitality and sources of livelihood in rural areas.

In South Finland all of the regions were partly included in the programme. In Southwest Finland only the sub-region of Loimaa was fully an Objective 5b area. Other sub- regions were partly Objective 5b and partly non-assisted areas. For example in the Salo sub- region most of the funding was directed to nearby areas of the town of Salo so that the main target group, rural areas, were more or less neglected. In the archipelago the projects were mainly developing tourism and environmental issues. In the Loimaa sub-region the programme funding was not able to compensate the losses of jobs in agriculture. However, interest towards projects was awoken.

Only 30 % of the Häme region was included in the Objective 5 programme. That made also the implementation of projects difficult. Despite this fact the results were positive. Projects developed during the programming period to be more versatile and high quality while the actors learned the idea of project work. The cooperation between different actors became more lively, especially in village development, mechanical wood processing and tourism. Still, the projects were small and therefore total strategy was hard to control.

In the Päijät-Häme region Objective 5b had very positive results especially in village development projects and in enhancing women entrepreneurship, which both had continuity in networks and local action groups also after the programming period. Considerable amount of the money was also directed to tourism in the countryside, but not many jobs were created to replace the loss of jobs in agriculture.

In the Kymenlaakso region the main aim was to create basis to the new programming period by emphasizing the objectives of the regional strategy. The objectives included project entities that last for years, more than one programming period, for example creation of the innovation and technology park, the Utti helicopter centre, repair construction centre to old steam brewery etc. The most important entity is by far the Vaalimaa border crossing area. Objective 5b together with Interreg have been funding projects in infrastructure and

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The effects of Objective 5b to the problems of depopulation and ageing in South Karelia are hard to predict. There are no significant changes in those fields and the jobs created in service sector and production have not been able to compensate the losses of jobs in primary production during the programming period.

ESF

The activities of the European Social Fund are implemented through programmes. During the programming period 2000–2006, these programmes include Objective 3, the regional Objectives 1 and 2 and the trans-national Community Initiative EQUAL. The programmes were prepared in co-operation with the European Commission, which also adopted the programmes. The central actors from the Finnish public and private sectors, the labour market organisations and other central organisations participated in the programme work at the national level.

The ESF programmes are financed jointly by the EU and the Member States. The EU financing share of Objective 3 and EQUAL are covered by the ESF. The regional objectives 1 and 2 are funded by the ESF and the European Regional Development Fund (ERDF) among other funds. Total funding of ESF co-financed activity in Finland during years 2000–2006 is Euro 3 billion out of which the EU share is Euro 873 million.

The Ministry of Labour is the authority responsible for Objective 3 and EQUAL in Finland. The Ministry of the Interior is the authority responsible for the regional Objectives 1 and 2.

In Finland, ESF activities seek, experiment, produce and implement new solutions for the national labour market, education and training as well as the industrial policies. Good practices are also being spread. The ESF channels funds into developing new models to boost human resources and to secure employment. ESF activities supplement national activities.

Finland's first structural fund period began in 1995, the year Finland joined the EU, and ended in 1999. During the first five years, the total ESF funding was € 2.2 billion, including national public and private funding. For the implementation of different ESF programmes, Finland received € 589 million from the EU. During the years 1995–1999, about 4,200 projects were launched, involving 650,000 people as participants.

In South Finland the EU share was 20 million € during 1995-1999. Additionally there is national and local public funding as well as private funding.

ESF has supported for example: - pathways for long-term unemployment to working life - education and other development arising from working life and enterprises - life-long learning - entrepreneurship - new ways of working - keeping the ageing labour force working - employment of the young, handicapped and women - apprenticeship training - globalisation

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- new cooperation between administration, organisations, enterprises and education - local partnership

Objective 3, 2000–2006

The Objective 3 Programme in Finland includes the whole Finland except the Åland Islands and in Objective 1 area the Objective 3 is being carried out within Objective 1 Programme. During the period 2000–2006, EU funding is € 415 million in Finland.

The Eu share for South Finland is 13,5 € and additional national and local public funding as well as private funding.

The Objective 3 Programme strategy focuses are: - utilising the demand of the workforce and improving on employment - enhancing the similar opportunities and equality in work life - improving the quality and the effect of education, advancing occupational mobility, and strengthening the relationship between education and work life - developing the know-how equity to support entrepreneurship, renewal of the work life and utilisation of the technology

Horizontal focuses are information society, equality, local partnership, sustainable development, and preparation in every action.

Objective 3 Programme actions have been integrated into national action policies so that they are not overlapping but complementing each other.

The target is to employ and train about 250 000 people in Finland. In practice, the Regional Councils, the provincial governments and the Regional centres for Employment and Enterprises coordinate the projects on the regional level.

COMMUNITY INITIATIVES

INTERREG III, 2000–2006

The principle of the Interreg programme is that the national boundaries should not be an obstacle for balanced and harmonious development in Europe. The biggest programme financially is Interreg III.

The Programme is divided into three main aspects: co-operation across borders co-operation between countries co-operation between regions

Finland participates in six Interreg programmes during the programming period 2000 – 2006. Three of these programmes are in the area of either East Finland or South Finland.

Interreg III A Southeast Finland–Russia is a programme of the Regional Council of South Karelia. The total costs in the programme are € 55.780 million, and the EU funding is € 21.800 million

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Interreg III A Finland–Estonia is a programme administered by the Regional Council of Southwest Finland. The total costs in the programme are € 29.102 million, and the EU funding is € 14.551 million.

The cross-border co-operation is an important issue in the region and supported strongly by the Community Initiatives as well as other CPs.

LEADER II and LEADER+

The Finnish Leader II programme was implemented 1996–1999 and the objectives were to support local actions for developing rural economy and living conditions in rural areas.

Leader II supplemented the structural fund programmes due to its local bottom-up approach. The programme was very successful in activating and motivating people in rural areas to participate in the development work. As a result of the programme new forms of co- operation were born in the countryside and also between local action groups all over Finland. In the covered rural areas, many micro-business projects, new enterprises and jobs were created.

The projects were mainly in the fields of preserving and improving the environment and living conditions (24%), rural tourism (21%), training (15%), activation and administration of the local action groups (14%), micro- enterprises, handicrafts and local services (12%), utilisation and marketing of products from agriculture, forestry and fishery (12%), and feasibility studies (2%).

The present Leader+ programme aims to complement local development programmes in rural areas by increasing co-operation between local people and regional actors. These projects are also meant to increase co-operation between European Union members and rural actors.

Leader+ finances innovative, local projects that develop the countryside. Projects are planned and executed by local action groups. There are 25 local action groups in Finland within Leader+. This kind of local developing method suits well Finnish community-spirited village activity.

Leader+ highlights independence and locality. It is the people living in the area who are in the spotlight when Leader+ projects are carried out. Strategies and development programmes are planned for them to bring new approaches and actors to develop rural areas and to create new employment opportunities and companies. It is desirable that these projects aim to utilise cultural and environmental heritage.

Local action groups have the right to choose the most suitable targets and operational methods for their own projects. This helps the area to get projects that are aimed to improve the local situation in a way that suits for them.

Out of totally 25 local action groups, five represent South Finland. They have focused on small companies, countryside, employment, co-operation, and tourism.

In general, the size of the Leader+ projects have been about € 20,000–40,000. The biggest projects funded are around € 100,000 which is quite much regarding the fact that the funding for small rural development projects is not usually very big.

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SME

The objective of the SME initiative was to help small and medium sized enterprises in less developed regions to utilise common markets and to improve their competitiveness. The SME initiative complemented the structural fund programmes by supporting projects, which promoted the operational conditions of SMEs.

The Finnish SME programme focused on the development of business incubators, developing service structures for SMEs regarding questions related to internal markets and developing the competitiveness of SMEs and groups of enterprises. Furthermore the focus was on developing and transferring new technology, trans-national co-operation, networking and skills of the employees.

SME projects were implemented on Obj 6, 2 and 5b areas. The main share of the EU funding (51%) was used on the Obj 6 area.

ADAPT AND EMPLOYMENT

The implementation of the ADAPT and EMPLOYMENT initiatives in Finland was co-ordinated the Ministry of Labour. In the EMPLOYMENT projects broad co-operation networks were established in which different authorities, associations and companies took part. On the basis of an Employment-Horizon subprogramme an action programme for advancing the social and economic integration of disabled was created.

EQUAL

The objective of the Equal Programme is to advance new means with the help of international co-operation. These new means are meant to prevent social exclusion and other kind of exclusion, and to prevent inequality in labour. The activity is connected to develop employment and human resources. Equal aims particularly to enhance the employment of the people who have difficulties to be employed and are in the weakest situation concerning labour.

In the programming period 2000–2006, the funding frame is about € 165 million altogether. Equal covers the whole of Finland apart from the Åland Islands.

The Ministry of Labour is the national responsible authority for Equal and other Ministries (Education, Social and Health for instance) co-finance the projects.

The Ministry of Labour highlights projects that are innovative, wide network projects. These projects implement equality of genders, social dimension of the information society, sustainable development, preparation, support local development, and advance ethnic relationships.

The Ministry of Labour chose 37 projects in 2001. The public funding was maximum € 66 million for those 37 projects, which is about half of the whole program’s public funding frame.

In South Finland the target group is mainly unemployed people. The projects also concentrates on entrepreneurship and adaptation. The biggest project in the area € 3,363,760. The coordinator is located in Hämeenlinna. Quite many of the projects were around Turku in Southwest Finland.

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3.1.2 National regional policy

The national regional policy is guided by the Regional Development Act, which came into force at the beginning of 1994. This Act is supplemented with a Regional Development Decree. The aim of the Act is to promote the equitable and independent development of different parts of the country. For this purpose, Finland has adopted a programme-based regional policy and a system of graduated regional support for business and industry according to a geographical breakdown of aid areas.

The principles of regional policy and general guidelines for development, together with activities that fall within the competence of the Government, are defined in the objective programmes. Regional development funding takes the form of specified budget appropriations allocated to the various administrative sectors. The appropriations can be used to promote regional development targets and the programmes drawn up to achieve them.

The Government approved a new objective programme in November 2000. The programme aims to direct and coordinate regional development work during the period 2002–2003. Furthermore, the programme lays the foundations for the revision of the Regional Development Act and national regional policy in 2000–2006. The objective programme also outlines Finland's opinions on the reform of EU Structural Funds.

Regional development programmes are drawn up by the Regional Councils, which coordinate and direct development work in the regions in cooperation with the local authorities, State regional administration authorities and other bodies. The programmes lay down specific targets and strategies for regional development.

THE REGIONAL CENTRE PROGRAMME

The aim of the Regional Centre Programme (RCP) is the development of a network of regional centres covering every region/province, based on the particular strengths, expertise and specialisation of urban regions of various sizes. Regional development based on a network of regional centres results in a more balanced regional structure in Finland and an enhanced international competitiveness. In future, the resources of national regional policy are meant to be expressly directed to regional centres, and to the enhancement of the network consisting of them.

RCP is founded on the Programme of Prime Minister Paavo Lipponen's second Government, guidelines of regional policy, and the regional policy target programmes of the government. RCP is a government special programme in accordance with the Regional Development Act.

RCP is implemented on 34 regions. It was launched in March 2001 and will last until the end of the year 2006.

In South Finland there are 10 programmes: South Karelia, Kouvola Urban Region, Kotka–Hamina Region, Hämeenlinna Region, Forssa Region, Turku Region, Salo Region, Uusikaupunki Sub-region, Lahti Area, and Hyvinkää–Riihimäki Economic Area. (N.B. Hyvinkää is not within the South Finland area.)

South Karelia’s aims are: to increase know-how, welfare, regions economy policy, the use of land and the environment, tourism, culture, and leisure time.

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The aims of the Forssa Region are: clusters of excellence, basic security, vitality and competitiveness, leadership and county services, community structure and infrastructure.

The Hyvinkää–Riihimäki Economic Area’s aims are: increasing area’s social affinity, know-how and education, operational environment of the entrepreneurship life, creating mutual operation culture and public image.

The Hämeenlinna Region’s aims are: developing the line of activities, developing know- how, developing the operational environment of the companies, regional company services, and networking.

For the Kotka–Hamina Region the aims are: regional co-operation, service co- operation, know-how and means of livelihood, entrepreneurship, living and the environment, citizen capital, faith for yourself and the future.

The aims of the Kouvola Region are: regional operation readiness, entrepreneurship and means of livelihood, know-how, participation and sustainable development, regional co- operation.

The Lahti Region’s aims are: products and services, education, social cohesion, technology and development centres, working environment to live, connection to the capital city area.

The Salo Region’s aims are: forwarding regionalism, increasing know-how, increasing region’s attractiveness, and networking.

Turku region’s aims are: developing regional co-operation, the motorway E18 Salo– Turku–Naantali, Turku Science Park, developing logistics services, international marketing, well-being centre of the region, and the co-operation between growth centres.

Ministry of the Interior is in charge of the national co-ordination of the programme in co-operation with other ministries. The state supports the development work of the nominated urban regions by annually granting them basic funds, which amount to a half of the accepted expenses. In 2002 and 2003 approximately € 8,2 million annually of basic funds were granted to the regions. Total expenses of development thus add up to about 16,5 million €/year.

THE CENTRE OF EXPERTISE PROGRAMME

The Centre of Expertise Programme supports regional specialisation and cooperation between different Centres. Finland is thus generating a strong, effective network of Centres of Expertise to meet the challenges of the information society in the 21st century. There are 14 regional Centres of Expertise and two nationwide networks carrying out the Centre of Expertise Programme for 1999–2006.

There are three expertise programmes in South Finland, located in Lappeenranta, Lahti and Turku.

The technology cluster in Lappeenranta comprises the Lappeenranta University of Technology (LUT), VTT Manufacturing Technology and the Kareltek Oy Technology Centre (VTT = Technical Research Centre of Finland). The strongest fields of expertise are beam machining, advanced welding processes and mastery of sheet metal welding technology, machine automation and virtual design, dimensioning of thin-walled constructions and welded construction fatigue expertise.

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The basic idea of the Lahti Region Centre of Expertise Programme is to combine expertise in training and research with business know-how. This departs from the needs and problems identified in enterprise operations and from the opportunities provided by institutes of teaching and research. The fields of expertise concerned are design, quality and ecology. The Centre of Expertise programme is administered and co-ordinated by the Environmental Technology Center Neopoli Oy. A steering group has been appointed to direct the programme, with representatives of the various areas of expertise and of the principal training and research organisations involved. Enterprises are also strongly represented.

The work of the South-West Finland Centre of Expertise focuses on the following fields of expertise: Development of Biomaterials, Diagnostics and Pharmaceuticals, Surface Technology of Materials and Cultural Production. The objective of the Centre of Expertise is to shorten the time needed for commercialising innovations, to improve productive networking between universities and enterprises and to establish lasting and independent structures to serve joint research and development projects. This approach will give rise to new enterprises and reinforce the position of existing businesses in these specialisations.

SEUTU PROGRAMME

There are eight sub-regions in the Seutu programme. The aim is to speed up development based on the regions own strengths and specialisation. In turn, sub-regional co-operation of the municipalities and thus the strengthening of sub-regions are the goals for SEUTU experimental voluntary regional co-operation. The sub-regions were selected in 2001 and the programme’s term will end 2005. In South Finland there are 4 projects in Hämeenlinna, Lahti, Loimaa, and Turunmaa.

3.2 AGRICULTURE AND FORESTRY

3.2.1 Agriculture policy

The European Union’s Common Agriculture Policy leads the Finnish agriculture policy. It is important for national economy and for the whole society to secure the foundations for operations both in rural areas, in agriculture policy, and in food policy.

According to reports, Finnish agriculture has survived from the changes caused by joining in the EU. One of the changes was, that the national agricultural system with its farm subsidies was replaced with European Union’s Common Agricultural Policy. The European Union does not regulate the level of market prices with national border protection nor with export subsidies. Finland is securing the income level of the farmers and developing the structure of the agriculture production together with national and the subsidies of European Union.

Finland is situated between the northern latitudes of 60 and 70 degrees, so its location is directly reflected in farming conditions. The growing season in Southern Finland is nearly six months and in Northern Finland two-three months. In Central Europe the growing season is nearly nine months and in Southern Europe more than ten months, so many of the plant varieties grown elsewhere in Europe do not flourish in Finland. Finland also grows plant varieties developed specifically for a short growing season with long daylight.

Finnish agriculture is based on family farms. The average size of a farm is around 30 hectares. Due to the unfavourable natural conditions, the significance of aid in the income formation of agriculture is clearly greater in Finland than in the other EU countries. The

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Finland’s agricultural support scheme is based on forms of aid allowed under the EU’s Common Agricultural Policy. The most important of these are the aid for arable crops and livestock premiums financed in full by the EU (CAP support) and compensatory allowance and environmental support part-financed by the EU. The national aid scheme complements the EU supports. The EU funds are more than 40 % of agricultural support.

In 2001 there were 75,540 farms receiving agricultural support in Finland. Livestock production was the main line of production on 34,000 farms and arable farming the main activity on 41,500 farms.

Agricultural and horticultural revenue, including aid, totalled around € 3.9 billion in 2001. Of total revenue, aid accounted for 43 per cent, i.e. € 1.7 billion.

The structural changes in Finnish agricultural policy after Finland´s entry into the EU have been deep and fast. During 1995–2002 the number of farms has decreased by 23 percent. Whereas in 1995 there were totally 95,562 farms bigger than 1 hectare, 22,176 have finished since. Relatively the decrease has been biggest in East Finland, 27 % while the decrease in South Finland during the same period was 23%.

During the same period the average size of farms has grown from 22,8 to 30,3 hectare. The average age of the Finnish farmer is 49 years. The production is expected to remain on the present level as the production grows but the number of farms decrease.

The income of a farmer was in 1990 80 % of an industrial workers income while it was 74 % in 2000.

In 2002 27 % of the farms were occupied in other businesses than farming.

The farms (altogether 8,197 in 2001) in South Finland are mainly producing grain. In Southeast Finland farms produce 39 % of the country’s bread grain. In Kanta-Häme and Päijät-Häme, there were about 5,200 farms, and about 189,500 hectares of cultivated land. In Kymenlaakso and South Karelia, there were about 4,500 farms, from which 1,140 were producing milk in 2002.

Finland is the most rural country in the present European Union. More than half of the Finns live in the countryside. The development of rural areas is based on multi-annual regional development programmes, where part of the funding comes from the EU. Various kinds of village associations are very active in Finland. There are nearly 4,000 villages, with around 1,300 village associations and societies. Local action groups have increased the opportunities of rural residents to influence their own living conditions. Their activities cover virtually all aspects of life in the countryside. To improve the structure of agriculture, subsidies as well as Government loans and interest-rate subsidy loans are granted to farmers.

Finnish agriculture policy is close to rural area policy, because the agriculture is the most important livelihood in the countryside. According to a strategy for Finnish agriculture covering years 2000–2010, there are seven national aims to help to keep the Finnish agriculture competitive and to keep the countryside vital. The target is to ensure that Finnish agriculture provides safe, high quality, and alternative products also in the future. Finnish agriculture is also meant to meet the other expectations set by the society.

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The Commission new Agriculture Policy proposal in spring 2002 surprised the Finnish farmers. The proposal included many negative policies from the Finnish point of view. The most problematic part of the proposal was the separation of the subsidies from the production. The Finnish farms have high variable costs in the production. According to preliminary computation, the proposal would decrease the farmers’ income with € 75 million compared with Agenda 2000 decisions by the year 2012.

Rural policy includes five permanent priorities:

• Reform of the economic activities in rural areas • Development of know-how and human resources • Strengthening the existing service network • Development of the quality of the residential environment and community structure in rural areas • Sustainable utilisation of natural resources

The EU membership has increased and diversified the means available for rural development. In the programming period 2000–2006, the EU support channelled to Finland through the Structural Funds totals EUR 2.1 billion. Especially, the expansion of the Objective 1 Programme has increased the possibilities to develop East Finland.

ALMA

ALMA is the “Regional Rural Development Plan For Areas Outside Objective 1 For 2000–2006” and East Finland is thus not eligible for funding. The programme is implemented in the area of South Finland.

ALMA aims to keep the rural areas lively, by increasing the opportunities of the entrepreneurship, and by strengthening the economical conditions for the farms. The aim is to keep the villages in the rural area functional environment to live, to work, and for the entrepreneurs.

This development programme is implemented in three operational lines:

• development of the region’s agriculture and forestry • diversifying rural economy • development of the rural community.

For the programming period 2000–2006, the total public funding is about € 388 million from which the EAGGF part is about € 116 million. Rest of the money comes from the government, counties, and other public quarters.

ALMA is implemented in projects like Leader+ and Pomo+. Local action groups lead the projects in the area. These action groups have highlighted the issues that need the most attention in their areas.

The biggest projects can be about € 300,000 and the smallest can be less than € 5,000.

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POMO+

Pomo+ programme was made to supplement the Leader+ Programme. It is merely a national programme. The government pays 80 % of the national public funding and the rest of it comes from the counties. The national funding for the programming period 2001 – 2006 is about € 15,136,913.

General focus is in increasing employment opportunities and livelihood activity in the countryside. Quantitative objective is to create 300 new work places changed into full time jobs. Also, the aim is to renew or keep 130 work places and to influence on founding 60 new companies.

Basically, Pomo+ projects are implemented in a same way as Leader+ projects. Local action groups have created the strategy so that the local needs have been taken into account.

Out of 25 local action groups in Finland, 12 are in the area of this study. Of these twelve action groups, five represent South Finland and seven East Finland.

The activities vary according to the needs and interests of the villages. One can say that the impact of the work of the actions groups on rural development is significant. Besides strategic planning of the villages, they also promote and implement projects, create and maintain networks – national and international – and are very interested in cross-border co- operation.

3.2.2 Forestry

Forests cover almost three quarters of Finland’s total land area. The Forestry Department in Ministry of Agriculture and Forestry directs and develops Finland’s forest policy, promotes sustainable forest management, wood production and use of forest resources, and the protection of forest’s natural diversity.

The aim of the forest policy is to help advancing the livelihood of the rural areas. The means for the latter are sustainable development of the forests, sustainable care and use of the forests, and securing the diversity and vitality of the forests. There are certain laws to secure the previous, and there are forest organisations and the government’s funding policy to help these targets to come true.

Promoting Finland’s interests in international forest policy has become increasingly important. There are 13 Regional Forestry Centres subject to the Ministry, which are responsible for promoting and supervising forestry, the Forestry Development Centre Tapio, the Finnish Forest Research Institute and the Forest and Park Service.

Forests are extremely important for Finland. Finland is the most densely forested European country and it has a world-class forest industry. Nearly three quarters of the country’s total land area is covered with forests (23 million hectares). Annual felling amounts to around 55-60 million m³; natural loss is around 10 million m3 and annual increment 80 million m³.

Around one quarter of Finland’s export income is derived from forest industry products. 7.6 per cent of the Finnish forests and forest land is protected, which is a very high figure by European standards. The surface area of protected forests and forest land totals 1.8 million hectares. Finland has 440,000 private forest owners, who own 61 per cent of all

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European Union doesn’t have straight authority in most of the questions concerning forest in Finland, unlike in agricultural policy, regional policy, and environmental policy.

ALMA is the only Programme where is separately stated the funding frame for the forest and wood sectors’ actions. From the Programme’s public funding, the share is 18 % (i.e. € 71 million) during the whole funding period. Another EU funding sources were Objective 1, 2, and 3 Programmes.

Until September 2001, different administrations and counties had funded total € 75.3 million for the projects that are in conformance with the Finland’s National Forest Programme. The EU funding was on average 43.3 % of the public funding which was again 31 % from the total funding.

Every Regional Council in East Finland have their own Forest Strategy at least until the year 2005. National and international forest know-how has centralised in Joensuu in North Karelia. Forestry is a big employer in the area. Forestry employs also about 3000 people in Kainuu, about 2000 people in South Savo. Pohjois-Savo’s part of the whole country’s employment in forestry sector is about 8.2 %. Additionally, the wood production sector employs 14.2 %.

When it comes to South Finland the information is combined. Kymenlaakso and South Karelia have a common Forest Strategy. Varsinais-Suomi and Satakunta have combined Forest Strategy, like Kanta-Häme, Päijät-Häme, Uusimaa and Itä-Uusimaa. The information about the region is thus mixed.

3.3 FISHERY

The Department of Fisheries and Game oversees the fisheries industry, game management and reindeer husbandry. Decision-making is based on scientific knowledge relating to the state of fish and game stocks as well as to the sustainability of reindeer pastures. Regional authorities subject to the department are the Fisheries Units of the Employment and Economic Development Centres, and the Game Management Districts.

Lakes account for ten per cent (33,500 km²) of Finland’s surface area, and the country is surrounded by the Gulf of Finland, the Baltic Sea and the Gulf of Bothnia. There are around 3,800 professional fishermen, and around two million Finns engage in recreational fishing. Professional fishing, fish farming, fish processing and fish trading benefit from the Structural Programme for Fisheries Industry and the fisheries components of the Objective 1 Programmes, which are part-funded by the EU.

In Finland, hunting rights belong to the landowner. The number of registered hunters totals around 290,000. Game stocks are regulated by closed seasons and hunting quotas. Game management work carried out by hunting associations improves the habitats of game. There are no endangered game animal species in Finland. Of the large predators, bear, wolf, lynx and wolverine are found in Finland. In northernmost Finland, the main source of livelihood alongside tourism is reindeer husbandry. Reindeer owners belong to reindeer herding associations, which carry out reindeer management. The National Federation of Reindeer Herding Associations acts as the joint body of the reindeer herding associations. The Ministry of Agriculture and Forestry prescribes for reindeer owners maximum permitted reindeer numbers, so that reindeer husbandry is practised in a sustainable way.

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The food fishing industry is managed in accordance with the European Union’s common fisheries policy. This policy consists of resource, market and structural policies as well as a fisheries monitoring system. Of these the structural policy extends also to fishing on inland waters, which alongside sea fishing is significant in Finland. Fishing industry structures are supported by the EU's Financial Instrument for Fisheries Guidance, in accordance with a fishing industry plan. Finland does not operate a fish auction system and there is no producer organisation; fishermen sell their catches straight to fish dealers. The fish processing industry is divided into industrial fish processing and numerous small family business units. Processing units are concentrated mainly on the coast.

There have been two shipping equipment programmes (MOO III and MOO IV) in Finland in period 1995–1999. The aim has been in changing the capacity of shipping equipment, and in this way to increase the profitability of occupational fishing. There have been over 200 projects to modernize old fishing equipment. The main focus in these projects has been in improving working conditions, hygiene and fishing methods.

The quantitative target of the Structural Programme, about ten fishing industry development projects, was exceeded with 50 percent during the period 1995–1999. In the measure entity level the funding was used in repairing of fishing industry and to improve the condition for fishes to multiply. The measure entity was used poorly, because the EU regulation limited the applied projects badly. The regulation was not suitable for the Finnish circumstances.

The EU funding is included in the food fishing industry’s Structural Programme or Objective 1 Programme. These Programmes support company investments, infrastructure projects, and development projects.

Finland has its second Structural Programme of food fishing industry in the period 2000–2006. The programme is based on the regulation of the field of food industry, which determines detailed information about structural operations. The funding plans included in this Structural Programme concerns Finland outside the Objective 1 area; the Structural funding of fishing industry in Objective 1 area is included in East Finland’s Objective 1 Programmes.

The target during this period is to improve on the renewing and benefiting fish population. Also the focus is in modernising the fishing equipments, benefiting better the inland water fish population, improve the production condition of the water farming. Sustainable development must be taken into account in every aspects of fishing industry policy.

There were four regions in Finland that were qualified for structural funding during the Programming Period 1994–1999. These regions were South Savo, Kainuu, Lapland, and North Karelia.

During the Programming Period 2000–2006 there are three regions under Objective 1 in Finland that are qualified for funding, East Finland is one of them.

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3.4 ENVIRONMENT

Finland has already been working for decades to protect the environment and to promote sustainability. The nature of this work today is reflected in the 1998 national sustainable development programme, which makes all sectors of society responsible for looking after the environment.

The most burning environmental issues today are global issues: climate change, declining biodiversity, the accumulation of wastes, and the over-exploitation of the earth's natural resources - fish stocks, fresh water and forests. Finland has indeed signed all the most significant international environmental agreements, and also helped to shape many of them - especially at European and regional level.

Finland has been particularly instrumental in developing international forest policies, and in building up international understanding on sustainable forestry and conservation issues. One important short-term target is the establishment of a suitable framework for an international agreement on forests.

Where sustainable development and environmental protection are concerned, the heart of the national administration is the Ministry of the Environment. The Finnish Environment Institute - the national centre for environmental research and development work - works under the Ministry, as do 13 regional environment centres and 3 regional environmental permit authorities. Some of the regional environment centres' work, concerning the management and use of water resources, comes under the auspices of the Ministry of Agriculture and Forestry, however.

Municipal authorities have their own environmental responsibilities, for improving environmental protection and awareness, monitoring the state of the local environment, and granting various environmental permits, for instance.

3.4.1 NATURA 2000

Natura 2000 was created to protect the nature. The Ministry of Environment made a proposal in 1997 that included 1,500 targets to be protected. The proposal was 4.9 million hectares. The targets were mainly already protected areas. However, 170,000 hectares were other kind of areas from which 100,000 hectares were private.

The landowners made 14,300 remarks about the proposal. The Ministry of the Environment looked through the remarks and gave altered proposal in 1998. The proposal got smaller with 263,000 hectares because of the remarks.

The landowners had the opportunity to make a sequel remark. Altogether 6,638 sequel remarks were filed. The Minister checked the proposal according to the remarks.

The Government made the decision to approve the proposal for the Finnish Natura 2000 network. Finland made a proposal to Commission regarding the Natura 2000 targets areas – at this stage including both the disputed and the undisputed areas.

According to the decision made by the government, the landowners had the opportunity to complain to the Supreme Administrative Court of Finland. They made 850 complaints in 1998.

The Supreme Administrative Court overruled most of the complaints in 2000.

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The Commission gave Finland an order to fulfil the Natura 2000 network decision. The proposal was incomplete because it did not have enough information about certain type of natures nor about the habitats of some species.

The Government listened to the landowners again in 2000. There were 200 notes about the Natura 2000 areas. The decision was delayed because the Attorney General of the Government received about 10 complaints.

The Attorney General gave five decisions about the complaints in 2002. In these decisions the Attorney General states that there have been shortcomings in the Natura preparations. However, these shortcomings were not so bad that they would justify cancelling the Government’s decision.

The Finnish government tried to set up a law that Finland could only change the Natura decision documents with the permission of the Ministry of the Environment. The bill failed in 2003.

The Ministry of Environment gave new proposal about Natura 2000 areas, which were put back under consideration by the Supreme Administrative Court. Parties concerned can file remarks about the proposal to that Environmental Centre responsible for the respective area. The remarks have been given before May 15th, 2003.

3.4.2 LIFE – the Financial Instrument for the Environment

LIFE, the Financial Instrument for the Environment, introduced in 1992, is one of the spearheads of the European Union's environmental policy. It co-finances projects in three areas:

1. LIFE–Nature actions aimed at conservation of natural habitats and the wild fauna and flora of European Union interest, according to the Birds and Habitats directives. 2. LIFE–Environment enables demonstration and development of new methods for the protection and the enhancement of the environment. 3. LIFE–Third Countries funds actions concerning technical assistance activities for promoting sustainable development in third countries.

LIFE – Nature and LIFE – Environment have supported the five regions in South Finland.

LIFE – Nature

The LIFE funding is targeted mainly to the subjects in the Natura 2000 programme. The European Union finances maximum 50 % of the total costs and in special occasions the EU finances maximum 75 % of the total costs. The rest of the funding has to come from national sources.

All together 4 LIFE–Nature projects have been realised in the regions in South Finland. The biggest project funding from the EU was about € 1,060,761 and it went to Southwest Finland. The next biggest EU funding, again in Southwest Finland, was about € 715,303. The next was partly in the area in Kanta-Häme and in Päijät-Häme. The smallest project funding was about € 350,000 and it was made in Southwest Finland.

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The biggest funding went for treatment and renovation of traditional biotopes in Archipelago Sea. It is located in the area of Southwest Finland. Other funding went for protection of white-tailed eagle in Archipelago Sea, for renovation of swamps in the area of Natura 2000, and for protection and treatment of oasis areas in Southwest Finland.

LIFE Environment

LIFE – Environment projects are not only meant to help local problems but also meant to be useful in wider perspective. The funding is given to the projects that are innovative and demonstrating studies that have been made earlier. The EU finances maximum 50 % of the total costs and 30 % of the projects that are expected to produce remarkable amount of income or savings.

The regions in South Finland got 7 LIFE – Environment projects. The biggest project was SUSAGRI – project, which was actually a national project, but the research area was mainly in South Finland. They made researches for example in Southwest Finland and in Kanta – Häme. LIFE funding in SUSAGRI was about € 664,714. The biggest funding that targeted in the area of South Finland was about € 629,101. The smallest was less than € 300,000.

3.5 STATE AID

An efficient market is characterized by open competition and safe products. Markets are opened locally, regionally and globally by means of trade and competition policy measures that aim to ensure that goods, services, capital and people can move across national boundaries without restriction. As a member of the EU Finland is already a player in the single market, Finland is taking part in the framing of the EU´s joint trade policy and implements its policy measures in regional co-operation and international efforts under WTO.

The development of production is not the only thing to have an impact on the smooth running of competition: numerous institutional factors also play a part. Finland has opened the telecommunications, forestry and energy sectors to competition. These sectors have a major effect on competition.

Finland is also going ahead with putting public procurements on a more competitive footing and has drafted a detailed programme for expanding the ownership base of State- owned companies.

Stating its position in different forums, Finland has resolutely opposed supporting traditional fields of industry with public funds.

International competitiveness is a key factor that underpins the job-creating capabilities of companies. The task of public authorities is to formulate and implement long term policies so as to ensure that companies operating in Finland have the necessary business framework to maintain and improve their international competitiveness. The industrial policy seeks to eliminate obstacles to a well functioning market by promoting competition, the smooth operation of the capital markets and investments in infrastructure, R&D and education and training.

One central objective is to further real entrepreneurship that is independent of State Aid.

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In Finland The State and National Aids are delivered to companies via the ERDF Structural Funds, T&E-centres and contracted state owned companies in forms of tax exemptions, grants, loans and subsidies after being notified by the EU. The Commission has decided that a budget of 36 million € is allowed for accelerating write off for SMEs in certain regions during 2001 – 2003.

The Comission has also allowed a budget of 2,7 million € for 2001 and 3 million € for 2002 for loans to entrepreneurs aiming at promoting investments in small and medium sized enterprises and transfers between SMEs.

The State Aids as well as support for development and investments, R&D are included in the regional Structural Funds – also the funding delivered by Finnvera and TEKES (state owned.technological development centre).

Finnvera plc is a specialised financing company offering financing services to promote the domestic operations of Finnish businesses, and to further exports and internationalisation of enterprises. Finnvera is owned by the Finnish state and act as Financial Intermediary for a part of the ERDF funding and state aids. The information is concealed and detailed information on companies can be obtained.

In South Finland the level of NGE is varied depending on the region. In 1995-1999 were all regions are also only partially eligible. In Southwest Finland the NGE level was the highest, 28,2 %. In Päijät-Häme, Kymenlaakso and South Karelia the level was 21,7 % and in Häme only 16,1 %. In 2000 the level of regional aid became lower but also clearer. South Karelia also became totally eligible. The NGE level is lowest in Kanta-Häme, 16 %. In all the other regions the level is 20 %.

3.6 OTHERS

3.6.1 Trans-European Network

Finland is part of the transport corridor of the Nordic Triangle, which is one of the fourteen priority projects in the Trans-European Network programme and is implemented together with Sweden and Norway. In Finland, the Nordic Triangle covers the road and rail connections from Turku to the eastern border via the capital region. That area also receives 85 % of the TEN funding in Finland. For NUTS 2 region South Finland this means that both the westernmost regions and the easternmost regions are a part of the priority area. However, the most centrally located regions of South Finland are not directly benefiting from it.

The most important road of the Nordic Triangle is the European Road E 18. Two of the three main sections are also concerning South Finland: the Turku–Helsinki motorway and the Helsinki–Vaalimaa motorway. Those highways will connect Southwest Finland and Kymenlaakso region more tightly to the capital region but seem not to have considerable effects in regional cohesion in the region of South Finland as a whole. That concerns also the improvement of the Rail Network in the Nordic Triangle. For example one of the main targets is the construction of the Lahti–Kerava track, which will decrease travel times from Päijät- Häme region to the capital city area. The objective is to have the most important projects related to the Nordic Triangle realised by 2015, so the precise effects of TEN funding on regional cohesion are hard to predict at this phase.

In South Finland there are also ports that are included in the Class A TEN-ports. The ports of Hamina and Kotka in Kymenlaakso region together with Naantali, Uusikaupunki and

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Turku in Southwest Finland are part of the TEN network. Also the inland ports of the Saimaa Sea are recognised in the TEN network as an entity. That concerns mostly the region of South Karelia.

The effects of TEN funding to regional cohesion are fairly impossible to define on a short-term basis. How the funding is divided between regions (even in NUTS 2 level) is impossible to find out because of the fact that the development projects are trans-regional or even national and often multi-annual (MIP). Also the benefits of the projects are spreading to even larger areas. When talking about TEN funding it is also the fact that the funding is directed to issues and not to a precise project. Effects to regional and economical cohesion are minimal and could be seen as side effects taking into consideration the fact that the most important factor of the TEN network in Finland ought to be to connect Finland to the rest of the Europe. Most of the development projects receiving TEN funding are also mostly funded with national money. In general only 3–6 % of the funding is coming from the EU. That leads to the fact that the development process could probably proceed regardless of the EU funding.

The managing authority for TEN funding is the Ministry of Transport and Communications. In charge of the implementation of the projects are mainly the national Finnish Road Administration, the Finnish Rail Administration, the Finnish Maritime Administration and the Civil Aviation Administration.

3.6.2 Framework Programmes

Finland has participated in individual projects and programmes within EU research programmes since 1987. The Fourth Framework Programme was, however, the first programme in which Finns have been able to take part on an equal footing with organisations from other EU Member States, due the fact that Finland became member of the EEA in 1994 and member of the EU in 1995. Finnish research organisations and companies have thus increased cooperation with other member states already before the membership.

Information concerning Framework Programmes has not been categorized regionally. The Finnish Secretariat for EU R&D, which is a part of Tekes (National Technology Agency of Finland), is unable in such a short notice to gather and analyse the implementation and impacts of the projects in regional level. This is why the impacts of the Framework Programmes to regional cohesion are in fact impossible to describe. However, some remarks can be done.

Fourth Framework Programme

National evaluation on Finnish Participation in the Fourth Framework Programme has been published 1999. According to that evaluation Finnish participation in EU research programmes was concentrated in the Uusimaa region (the capital city area). Over 60 % of the participants were from Helsinki Metropolitan Area and from the surrounding province. Otherwise the participation is very scattered. In NUTS 2 level South Finland, the Häme and Turku regions were acknowledged with participation of few percentages. The information provided did not otherwise take the regional dimension into account.

In national level over 58 % of the co-ordinating organisations in shared cost actions were research centres and universities. Also the distribution of Finnish participants was very similar. Many of the organisations are operating in national level, one of the biggest being VTT, which is an impartial expert organisation that carries out technical and techno-economic research and development work. The biggest regional organisations carrying out R&D actions

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Fifth Framework Programme

The national evaluation on Finnish participation in the Fifth Framework Programme is just beginning.

Compared to the European level the number of Finnish co-ordinators is few. Usually the co-ordinator is a research centre.

3.6.3 Innovate Actions 2001-2006

INNOVATIVE ACTIONS OF SOUTH FINLAND

The Innovative actions programme is co-funded by the Regional Development Fund of the European Union. It is being implemented in more than 80 regions in the European Union during the years 2002-2004. Each region has an own programme adapted to its specific characteristics, which will be implemented through the projects to be funded.

The innovative actions aim at supplementing the European Structural Fund programmes and thus at increasing differences of the level of development in different regions. The innovative actions enable testing of risk-bearing ideas and practices, which has not been possible in the framework of the traditional structural fund programmes. The innovative actions improve competitiveness, raise the level of technological know-how and create new jobs in the regions concerned. The innovative actions “aim to create a laboratory for experimentation on regional development in Europe, focusing on actions, which are genuinely innovative”.

In Finland the Innovative actions programme is implemented in three regions; in southern, eastern and northern Finland.

InnoELLI is a programme of innovative actions funded by the European Regional Development Fund (ERDF). The strategic theme of the programme is eEuropeRegio, the information society at the service of regional development. The programme has been prepared by the South Finland Regional Alliance, which is a regional co-operative organ for seven regional authorities, i.e. Regional Councils. The programme area comprises the regions of Southwest Finland, Uusimaa, Itä-Uusimaa, Kymenlaakso, South Karelia, Kanta- Häme and Päijät-Häme.

The InnoELLI programme lasts two years and is valid until the end of the year 2003. The European Commission has approved € 2 million for a regional programme of innovative actions for the Etela-Suomi region in Finland. During the period 2002-2003, the European funding will attract € 2 million in further investment from the public sector, creating total resources of € 4 million.

The aim of the programme is to create a new type of co-operation between different actors and regions within the sectors of logistics and environmental technology. These two fields are particularly important to the economic activity in the programme area and also have a strong potential of benefiting from recent advances in ITC.

There are five funded projects in South Finland.

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• Extending the logistics know-how within the area of the South Finland Regional Alliance (LOLLI) / Total funding: € 1,600,000 • Vitality through Regional Logistics/ Total funding: € 500,750 • Development of a logistics chain for small volume food products with temperature requirements / Total funding: € 217,980 • InnoEnvi - "South Finland Environmental Cluster - Networking and know-how" / Total funding: € 1,400,000 • Developing energy efficiency in public buildings by means of an environmental portal and benchmarking services / Total funding: € 280,000

4 ASSESSMENT OF THE IMPACT: MAIN RESULTS

The main CPs with major impact on the regional cohesion in South Finland are Regional development and the Structural Funds on one hand and the Agricultural policy and CAP on the other hand and the environment policy. The other relevant CPs are of minor importance, but have certainly increased cross border co-operation and regional co- operation. The Interreg and TEN funding have been important as they have forced the actors to combine their resources and also promoted cross border co-operation.

Some of the programs have supported projects that would have been implemented nevertheless by means of national and regional policy and funds, but has brought value added to implementation of the programmes and projects.

The impact of Community policies to regional cohesion at NUTS II level in South Finland is not very easy to estimate. There are many different regions and many programs implemented in the region of South Finland, which horizontally covers the south of the country beginning with the unique archipelago of Southwestern Finland to continue to the Russian border in the east. The metropolitan region is not included. A regional approach in assessing the impact would therefore be more relevant but requires much more time than available in this study.

According to evaluation reports and key informants, both the Obj. 2-program as well as the Obj. 5b program were important instruments in order to meet the specific needs in the region. In some regions, Päijät Häme for instance, the Objective 2 program has clearly had an impact on the most relevant indicators in the region: population, employment and jobs. Access to funding was crucial in order to boost the development in this specific region suffering from very high structural unemployment. The impact of other regional policies is more difficult to estimate, merely due to the minor size and the fact that the impact of ESF will be seen much later. The national development projects – Region Centre programs and SEUTU pilot program – aim at fostering the regional development bodies to co-operate and promote co-operation at all levels. This is in line with all the other community policies, and will as a side effect also decrease the eventual overlaps existing.

Many informants confirmed that positive development would have taken place in spite of the CPs. Regarding Obj 2 it is very clear that without this specific funding the regional development in Obj 2 regions would have been very poor.

It is evident that the number of enterprises and jobs created in these areas has increased, even though critical voices tell that the figures are too optimistic and based on estimations made by project leaders.

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However, ESF funding has been an important tool for enhancing the employability in the Objective 2-regions in order to secure that companies get skilled employees whenever needed.

The Obj 5b program has had a clear impact on the entrepreneurship in the rural communities of the Obj 5b-area. The stock of enterprises had grown and also been strengthened. Secondly, it had been possible to promote development of the infrastructures, which is crucial for the rural communities. Thirdly, the program had a strong impact on creating a new culture of co-operation as well as activating the social capital. The latter has been very important particularly for the future in rural communities.

There were also some interesting remarks with importance regarding to regional cohesion: more emphasis should be put on strategic planning and obtaining relevant and updated information on the operational conditions in the region as well as development trends. It was also recommended to develop bigger multiannual projects including development, investments and training. It was also stated that it is not fruitful to separate agriculture and rural development, but treat them as an entity. And even though the new national regional strategy focuses on strengthening the position of regional centres, remote areas and traditional rural regions should not be left behind.

There was a lack of cohesion of CAP and Regional Policies in some regions since according to the evaluations the rapid decrease of farms was impossible to prevent or slow down with other policies.

In South Finland there were big problems during the first programming period to develop broad projects due to the variety of programs and non-assisted areas. It was almost impossible to stick to a regional strategy, at least on the boundaries between assisted and non assisted areas.

In the Obj 5b program women were addressed in particular and the results of a project that promoted female entrepreneurship was very successful and innovative.

An interesting aspect from the cohesion point of view was that tourism was supported in many programs and projects carried out, but the impact on employment and new jobs in accommodation and restaurant services was very poor.

In some regions, especially in the Eastern Karelia, the loss of population was 1000 persons during 1995-1999. This is the explanation why the unemployment rate decreased by 4%. There is an increase also in the number of jobs created within service sector and processing industry, but the number was too poor to balance the loss of jobs in agriculture.

The general opinion was that the R&D actions within the research framework programmes have been very important, but created new jobs particularly in the universities that implemented the projects. But on the other hand the framework programmes had an impact on the most important and strategic fields.

Agriculture

Regarding the consequences of the common agricultural policy for regional cohesion in Finland, there has above all been a big change in the political framework.

Following the EU entry in 1995, producer prices sank by 40 %. Within the first year of membership, the number of active farmers sank by more than a sixth, from 115,000 to 95,000. The decrease in both the number of agricultural units and their incomes has

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FINAL REPORT (ANNEX I) developed the fastest in Eastern (and Northern) Finland. Uncultivated fields are not an unusual sight. Bureaucracy, furthermore, has increased immensely.

As for fishery, its importance for regional economy is, according to our informants, minor both in the lake area and in the archipelago.

Thanks to the EEA treaty, the harmonisation of Finnish law with that of the EU started already before the Union membership. This goes for agriculture and alimentary production as well as for animal protection. However, the harmonisation of Finnish environmental legislation essentially started only after the 1995 entry into the EU. The transition to the environmental legislation of the EU has clearly been the biggest change and it shows a very significant impact on the agricultural trades and industries in Finland.

It needs to be pointed out – over and over again – that all-European regulations tend to fit very poorly with the natural and cultivated environment in Finland. All too many regulations are very difficult to adapt to the Finnish reality. Nature remains different in different parts of Europe, and in the majority of instances, Finland has been more or less alone in defending its particular points-of-view. Negotiations often have been quite asymmetric for Finland. Consequently, the massiveness of the common agricultural policy, too, in many respects doesn’t very well take into account the realities of Finnish agriculture.

Still, regarding the rest of the legislative work relating to agriculture, harmonisation hasn’t changed very much: in some cases, the law has become more strict, in others, less so.

In the alimentary industry, there have been needs for investment prompted by the EU membership, especially in SMEs. The threshold for taking up entrepreneurship has risen. One may question whether the quantity of legislation really is reasonable, as it already clearly affects the conditions for entrepreneurial activity.

As for the question of agri-environmental versus ‘traditional’ forms of agricultural compensations, it was pointed out that this really isn’t an issue of contraposition: the agri- environmental support has proved to integrate well into the Finnish agricultural scene. Over 90 % of the farms are registered for agri-environmental compensations.

Since the Finnish entrance into the European Union, cooperation between actors has increased essentially. Nowadays, networking is always an alternative to be considered in the scene of agriculture and alimentary industries. Programmes and projects in general prerequisite collaboration within a consortium of partners, and once the new way of working has been internalised, all involved benefit from it. Traditionally in Finland, collaboration among farmers was not an obvious solution; especially this goes for the eastern and northern parts of the country.

Rural development

With the programme period 1995–1999, an unforeseen volume was brought to rural development. Prior to this period, which coincided with Finland’s entry into the European Union, there were only a couple of million euros per annum available for regional development. Then the sum soared by thousands of percents. Funding for enterprises also increased.

During the financing period of 2000–2006, there is still somewhat more money available for co-funding of rural development through the EAGGF.

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Rural regional development is, depending on the sub-region, either funded through Leader programmes or their parallels (presently: ALMA) or integrated with structural funding.

LEADER+ functions well as a sort of ‘pepper funding’ of rural development: it succeeds in mobilising new players in the rural scene – small ones, too – into working on development, it motivates and encourages to find innovative actions and new ways of doing. The workers of the actions groups collaborate closely with people in the countryside and function as advisors to local organisations.

The national ALMA programme for regional rural development (2000–2006) is financed through the second CAP pillar. In comparison with the prior programme period, there has been a positive development in that all rural environments now are eligible for these measures. Furthermore, a very versatile selection of rural development measures can now be included in the programme (e.g. village development; general development schemes of branches or trades; investment, start-up and development support for enterprises).

Positive effects are seen: branch-specific and thematic programmes (e.g. carpentry, tourism, food production) have emerged, there are trans-regional projects, and the local action group work has been mainstreamed into the regional programmes as well. Entrepreneurial supports are graded according the rural setting – remote areas and heartlands receive higher funding in order to promote a more balanced development. The level of ALMA funding, again, is proportional to the population of the target area.

Environment

Through a series of interviews in May 2003 with experts at the Ministry of the Environment, a general panorama was obtained of the impact of European environmental policy and funding on Finland. Questionnaires to regional authorities responsible for environmental policy confirmed the conclusions.

Regarding experiences of the use of different environment-oriented programmes, there has been good general acceptance of their horizontal approach to the environment. But the enormous increase in bureaucracy around funding has become a big problem, especially in agriculture.

All informants shared the view that EC directives are taken too literally in Finland, even in instances when they are quite inapplicable and therefore very complicated to implement.

The general sentiment of the interviews is expressed in a quote from one of the interviewees: “The programmes are not obstacles for good environmental results – basically these are up to the players at the project level”.

Generally speaking, environmental aims are promoted horizontally in the programmes. Therefore, they foster cooperation across administrational and other organisational boundaries. Finnish authorities clearly have begun to cooperate more with each other after the EU entry.

More access to external co-funding tends to better attract potential project partners and commit them to consortia at e.g. the local level in order to tackle concrete development challenges.

Clearly, too, there is more cooperation between authorities – horizontally as well as vertically. In the field of environment this especially applies to the Ministry of Agriculture and Forestry—Ministry of the Environment axis (and includes e.g. joint internal training as well as

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FINAL REPORT (ANNEX I) coordinating meetings on a regular basis), but there also is collaboration with the Ministry of Labour and the Ministry of the Interior.

Regarding the impact of the environmental programmes the opinion was that maybe the same could have been achieved without Commission co-funded projects, but it is likely that same things would be done parallel in multiple countries without coordination and interaction. This especially goes for LIFE. Also, results would be less transferable. However, transferability often is much dependent on ecological factors; project with an industrial or conceptual dimension tend to be easier to apply in multiple settings.

An important notion that was made by one of the informants was that cohesion has been an aspect of lesser importance for European programmes in Finland. For instance, we have no designated cohesion funds. It is, however, without doubt in the interest of all ministries to keep the Finnish countryside alive and inhabited.

The emphases of e.g the structural funds are different depending on the region. In unemployment-stricken Eastern Finland, for instance, the creation of entrepreneurship has relatively higher priority.

Regarding nature preservation, there is an important notion on history. Traditionally in many EU member states, areas chosen for nature protection have remained in the same possession as they were prior to their preservation.

In Finland, on the contrary, such areas have been purchased and taken care of by the State. With the EU paradigm of nature protection, private landowners will carry more responsibility, and the acceptance of the programme among landowners has consequently been quite slow and arduous.

Simultaneously, there is an essential shift from preserving areas within strictly defined geographical boundaries to preserving habitats and ecological entities.

The employment effects of the European environmental programmes and their funding seem to be positive, but primarily small scale in a local perspective.

In general, environment-conscious methods tend to be more labour-intensive; in that sense it is safe to say that there is a positive effect. This goes equally for the care and the restoration of natural or built environments. However, scepticism was also expressed on whether there in reality has been any employment effect: evaluations have not unambiguously supported the assumption: the impact of environmental projects on employment as a whole was disputed. It is difficult to say whether the employment effect would have been different had environmental measures been implemented with national funding only.

Employment is one of the criteria, although not a major one, in the evaluation of environmental projects.

Legislation

Since joining the European Economic Area treaty in 1994, Finland began actively to harmonise its legislation with the EU, but not yet in the field of nature preservation. Now, the harmonisation process occupies a major share of the legislative resources.

Presently, there is hardly any capacity for making specific national laws and regulations regarding the environment, but perhaps there is no need either. The Water

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Framework Directive, for instance, is expected to keep the administration busy for years to come, although there already exists corresponding national legislation.

There are, however, numerous examples of directives that can be implicated only with difficulty in Finland, whether for ecological or societal reasons. Still, it seems that Finnish authorities often go to lengths to translate them into Finnish law as literally as ever possible. Many regulations seem quite irrelevant even to the ministry experts, not to speak of the public.

Some well-publicised disputes (regarding e.g. recycling of glass bottles) have indicated that for Finland, certain European directives risk being a step backwards environmentally.

One view was that perhaps environmentally Finland hasn’t actually benefited profoundly from the EU membership, because Finland already was active in the field before 1995.

But on the whole maybe the membership in the EU still has given a sort of ‘backbone’ to environmental action.

Investments

For instance, the VOC (Volatile Organic Compounds) directive has imposed relatively heavy, non-subsidised investments on small and medium-sized enterprises. The issue is that these compounds, although they have an impact of lower atmosphere ozone in more southern climates, do not have the same effect in Finland, and therefore there hadn’t been any legislation regulating them.

In agriculture, on the other hand, investments as a rule have received public co- funding. There is a clear trend towards larger units in agriculture, certainly not uniquely caused by EU funding, but perhaps accelerated by it.

Because of the northern, cold location of Finland, and also because of the structure of big industry, the consumption of energy per capita is relatively high, which gives problems in achieving norms for air pollution without additional extensive investments, although much already has been done.

The implementation of Natura 2000 will require public investment, too.

Specific programmes

The separate programmes administered (or co-administered) by the Ministry of the Environment were more extensively discussed with the official(s) in charge of that particular funding.

LIFE Nature

From 1995 to this date, Finland’s share of the LIFE Nature instrument has been 27 million € and about 30 projects relating to the implementation of the Natura 2000 network. Many of these have included land-use planning. For the Natura 2000 network, i.e. the preservation of biodiversity, this instrument, in spite of these limited resources, has been the most important and efficient form of European funding, because it has been directed specifically to the Natura 2000 areas. Also, it has carried a multiplying effect in the sense that it has changed the public opinion to the more positive in the target area. With concrete

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Because the Finnish Natura 2000 network concentrates on areas in their natural state, such as virgin forests and swamps, it only to a lesser degree receives agri-environmental support. However, in the relatively scarce cases of maintenance and restoration of traditional agricultural nature types, the support plays an important role in preserving endangered species and biodiversity.

LIFE Environment

Finland has had good success in LIFE Environment calls. In part, this may be due to the fact that the Finnish research community in academia and industry already before the EU membership had good experience of collaborating across organisational as well as national borders; also, there is a strong research tradition in general. The existence of an active low- hierarchy network of researchers within which there is dynamic flow of information is a factor that works in favour of ‘win-win’ activities such as setting up joint projects.

Judging from the quantity and quality of the projects with Finnish participation, these projects have been relevant in a European perspective.

Agricultural funding

In agriculture, decisively more has been achieved from an environmental viewpoint since the EU entry. Among farmers, the environmental side of agriculture was not much of a discussion subject before 1995.

At least from the point-of-view of the Ministry of the Environment, the adopted versatile horizontal approach to environment in agriculture seems to function very well and it accounts for water and air protection, native domestic animal races (there exist both Finnish sheep, lamb, horse, cattle and poultry). Environmental compensation covers 90 % of the geographical area. One can safely say that nowadays the concept of biodiversity and the reasons for protecting e.g. meadows and traditional landscapes are common knowledge.

The general climate in agriculture has become more open to environmental issues. Partly this seems to be due to the simple fact that there is more money available; also, environmental aspects need to be taken more into account than before. Of course, it could be argued whether the trend would have been the same without the EU membership, but still, it seems that at least in some areas much has been achieved that would not even have been considered before.

However, a critical voice noted that perhaps the changes, profound as they are, have been mainly on the level of attitude; and they are yet to be transformed into concrete action.

Another general notion is that bureaucracy has increased immensely, both for the public and the private sector, and most so in agriculture and other primary production.

In agriculture, the horizontal programme of environmental support reaches 95 % of the funding and 90 % of the geographical area. Consequently, a very essential part of the agricultural support is agri-environmental support, which therefore is an important source of income for farms. Environmental requirements are followed at the farms – biodiversity, shelter zones etc.

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Since the EU entry, national agricultural funding has had more of an auxiliary role, but even national complementary support is subordinated to Brussels approval.

Structural funding

In the Objective 1 and 2 regional funds, 20 percent of the projects are to have an environmental dimension; for Southern Finland the percentage is 30 (due to heavier land usage). Obviously, however, structural funding as a whole plays a much more important role in several other member states.

Needs are different in different parts of Finland. In Eastern and Northern parts, the population is scarce and diminishing; there is a relative abundance of uncultivated nature, whereas in Southern Finland, the population is ever growing and in many places causes quite a pressure on nature.

Mid-term evaluations suggest that the Finnish Objective 1 and 2 programmes have worked positively for the environment. The initial opposition of in particular agricultural producer groups to the EU paradigm of nature protection has, however, resulted in nature- oriented projects being stalled or not implemented.

The most profound changes in environmental policy addressed were that the life-span awareness regarding products is on the rise. Another noted that the biodiversity aspect has been generally accepted, in nature conservation as well as in agricultural environments.

A profound change affects the principles for nature preservation, where private landowners become responsible for preserving their land to the extent it is affected by preservation schemes.

Environmental assessments would seem to become ever more important in the future. The SEA (‘Strategic Environmental Assessment’) directive is presently being introduced into Finnish legislation, and it might be an efficient tool for monitoring environmental politics.

A critical note was also made that the emphasis on innovative approach in e.g. projects has not necessary been only beneficial, as there is a great risk of focusing on novelty for novelty’s sake. Environmentally, traditional methods after all often have proven to be the truly sustainable ones.

Another point was that the often critical and pioneer voice of the Nordic Countries has become less powerful internationally since Sweden and Finland joined the EU; now it is carried by Norway alone. Still, what is important, the general attitude towards environmental issues has turned to the positive. And probably much has been achieved which would not even have been considered had there not been European programmes available.

Last but not the least, the increase of interaction and collaboration between organisational branches has been perceived as very positive, and it may well have future spin-off impact beyond immediate needs.

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5 COORDINATION

There has certainly been a lack of coordination of community policies in the initial phase of the programming period starting at 1995 when Finland entered the EU. The situation has changed and especially during the recent years coordination exists and is even promoted. Many of the authorities interviewed addressed increased co-operation as one of the main positive experiences in South Finland.

There is, however, a risk for overlaps in activities, which also was addressed in some interviews. This could be the case in situations where regional cohesion is strongly promoted and many financial bodies and regional development bodies focus their activities and efforts to one certain field in a region. On the other hand concentration often boosts growth and development, which has been addressed in evaluation reports. And the broad coordination of programs particularly in South Finland has minimized the risk and instead brought regional co-ordination and systematic planning on the agenda. They have fostered a totally new management culture as well as increased the co-operation and partnership – even involving new actors and women in planning and management.

Another issue that was addressed by some interviewees was that the ESF Community Initiatives were a bit problematic to handle though co-ordination existed, the Ministry of Labour being in charge of ESF as well. The problems encountered at local and regional level were due to the fact that the reports at national and regional levels concerning the initiatives were done by the same concept as ESF projects though the approach and the objectives were totally different.

In rural policy, from an administrative viewpoint, the most challenging aspect has been to coordinate measures of different funding bodies and different programmes.

A problem has been that the organisational structure for administering and supervising the funding of agricultural policy has been poorly suited for matters of rural development, for instance. Another is that the slow start of the present programme period there has in reality resulted in a two-year break in the funding of local rural development.

Under Objective 1 through the EAGGF, basically the same measures are supported as via ALMA, with the addition of structural investments in agriculture. Since Objective 1 is a programme that integrates several sources of funding, it should – at least in theory – be smooth to coordinate the projects of rural development.

In areas falling under Objectives 2 or 3, the ALMA programme is coordinated through regional authorities. At least in principle, these objectives include the potential of promoting rural entrepreneurship and competence, but practical implementation varies from one region to another.

6 GOVERNANCE ISSUES

The model of governance in Finland is more or less unique in Europe. Many different authorities at national, regional and local level deal with Community Policies. This model fragments the actions. It is hard to create project entities with real impact regarding employment, entrepreneurship. Instead a broad variety of different projects has been created.

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When Finland entered the European Union all actors involved in regional development had to adopt a totally new approach and new working methods. The methods that the programming work required were very much different from the methods used. The ministries were not used to co-operation on a broad base horizontally in planning and implementing regional development. Their experience was limited to vertical co-operation. This was also the situation at regional level. The new situation forced the authorities into closer co-operation. The distribution of power in decision making also changed. The regional planning, putting the plans into practise as well as division of tasks changed at the same time.

This is the main reason for the delayed process in the initial phase, also the number of reforms during a limited time caused delays. The situation could have been better if training would have been put into practise before the process started. The lack of experience, practice and know how caused problems to the entire administration – as well as to regional and local actors who were supposed to deliver project ideas and plans.

It took some time until the authorities realised that they needed personnel resources in order to be able to carry out the work. Due to the lack of experience directives had to be changed several times, which also delayed the implementation of the programs. Monitoring of the process was poor in the initial phase, gathering of statistical information was not always organised in a proper way which affected the evaluations. The difficulty to measure the impact on employment in number of created jobs was merely up to the project managers to assume.

Involving new actors in a process that is not familiar to anybody, is hard – many projects suffered from this in the beginning. The bureaucracy was heavy, reports had to be rewritten, the systems of payments and requisitions of payments as well as the monitoring were new issues to everybody.

The poor understanding of the bottom up principle also caused problems and that is why there were not many actors in the beginning. On the other hand, the administration was not able to inform, involve, advise nor activate new partners. Instead the public sector units, like universities and other training units became very active. Nowadays many projects are run by the financing body itself.

These problems have mainly been solved during the second phase of the previous and during the new programming period. But according to our informants the Finnish administration – obviously influenced by the EU administration – has created a rigorous bureaucracy, which recently has started to affect the actors and decreased their interest in getting involved in projects. Even though many things have developed ad become better there is still a lot to do if the community policies shall be put into practise at regional and local level with a bottom up approach. The delivery of financing is still a long process, small actors have problems with cash flow, the management is a complex process and the monitoring is often focused on tracking cents and crooks.

The European programmes have imposed collaboration, but on the other hand, a genuine quest for cooperation has emerged within a spectrum of players (entrepreneurs, the educational sector, research, developers, etc). Thanks to the programmes, new forms of cooperation and collaboration have evolved – one might even say that this has been their most fruitful outcome.

In South Finland the regions have formalised their cooperation and also acts as an interest group towards the national and European institutions, expressing their opinion for instance concerning regional cohesion.

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7 CONCLUSIONS

To assess the impact of Community Policies on regional cohesion was not an easy task due to the fact that the state ad regional administration in Finland is complicated and fragmented. The state and regional administration and the responsibilities for delivering funding is decentralised, but there are far too many boundaries crossing the regions and making the implementation of broader projects very hard. The State has its own regional and local administrations but the regions covered are not similar to those responsible for regional development. For the report of Southt Finland 5 Regional Councils, 2 Provincial Governments, 3 Employment and Economic Development Centres and 3 Environmental Centres were contacted for information. Obtaining quantitative information on NUTS II level caused problems, which however, are identified. Some authorities have created systems which enables data collection at that level – others do it manually.

The regional identity is very strong at NUTS III level in South Finland as it is in Finland in general and the impact of the Community policies can clearly be identified at that level. There common identity at NUTS II level is weak, but growing among authorities. There are structures and administration that could support the development of such an identity among regional actors in South Finland, but among local inhabitants such an identity is very far away. Furthermore, to some extent the borders between NUTS II areas contradict those of the historical provinces of Finland. The real cooperation of the regional councils at NUTS II level is weak and merely technical, while the co-operation between certain regions and many sub-regions is strong. That is why it is extremely important to notify and respect the differences between the regions in the programming phase and when strategies at NUTS II level are drawn up.

The overall impression is that the impact of the Structural funds and regional policy funding, the Common Agricultural policy and the Environment Policy has been strong in East Finland. Without subsidies the Finnish Agriculture would not survive even in South Finland. The transition to the environmental legislation of the EU has clearly been the biggest change and it shows a very significant impact on the agricultural trades and industry in Finland.

The Structural Funds, Community Initiatives and national funding for regional policy have been very important for the region and enabled to handle the structural changes and create employment where jobs have been lost. The impact of the Obj 5b and Obj 2 program has been important in order to maintain and restructure agriculture, create new enterprises and enhance employment. But without new enterprises or development actions in the existing enterprises there will not be new jobs. In certain parts of South Finland. ESF measures as well as national employment measures are important in order to supply the companies with workforce. R&D programs and projects have stronger impact on regional cohesion in areas where universities and research institutes are present.

Also the cross border programmes and the trans-national parts of the community initiatives have broaden the views of actors and brought new innovative elements in the local and regional development. The implementation of the CPs have clearly fostered the actors to co-operation and a new culture of management and decision making is developed. However, there are still problems with the bottom up approach and involving non traditional actors – and women – on the arena.

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8 GUIDELINES FOR THE COMMUNITY ACTION

The contribution of CPs to social and economic cohesion could be improved by encouraging the regional actors to put more emphasis on strategic planning, obtaining and analysing updated and relevant information about different CPs. in operation in the region, the operational conditions in the region as well as development trends.

Multiannual and bigger project entities should be created including development, investments and training, instead of having separate projects that might cause overlaps and have a negative impact.

Agriculture and rural development should not be treated separately, but as an entity. Regarding the national regional development strategy which focuses on strengthening the position of regional centres, remote areas and traditional rural areas should not be left behind.

It is obvious that the administrational culture and structures in Finland prevents the co-ordination of programs and in the end might decrease cohesion. It is important to create regional structures that support co-operation and co-ordination and improve the information about CPs. Benchmarking, dissemination of best practises concerning innovative ways of implementing programs and networking should be funded by new proposals.

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BIBLIOGRAPHY

- Interviews and questionnaires

- Ministry of Transport and Communications

- Ministry of Environment

- Ministry of Agriculture and Forestry

- Regional Councils of Southwest Finland, Häme, Päijät-Häme and Kymenlaakso

- Finnish Secretariat for EU R&D. Technology Development Centre (TEKES)

- Regional Environment Centre of Southeast Finland

- The Central Union of Agricultural Producers and Forest Owners, MTK

- The Central Union of Swedish Speaking Agricultural Producers in Finland

Publications

- Luukkonen T, Hälikkä S, Niskanen O & Eela R (1999). Finnish Participation in the Fourth Framework Programme. Publication of the Tekes International Co- operation 4/1999.

- Suomen tavoite 2-ohjelman 1995-1996 arviointi (1997). Sisäasiainministeriö. Aluekehitysosaston julkaisu 5/1997.

- Itkonen K, Heinonen J, Laakso S, Penttinen A & Salo H (1999). Suomen tavoite 2-ohjelman arviointi kaudella 1995-1999. 2. väliraportti. Sisäasiainministeriö. Aluekehitysosaston julkaisu 5/1999.

- Suomen tavoite 2-ohjelma 1995-1996. Loppuraportti 30.6.1999. Sisäasiainministeriö. Aluekehitysosaston julkaisu 6/1999.

- Itkonen K, Heinonen J, Laakso S, Penttinen A & Salo H. (1998). Suomen tavoite 2-ohjelman arviointi kaudelta 1995-1999. Väliraportti. Sisäasiainministeriö. Aluekehitysosaston julkaisu 13/1998.

- The Nordic Triangle – Development Programme for the Transport System in Finland. Brochure.

- Tavoite 5b-ohjelma 1995-1999. Mannersuomi. Loppuraportti (2003). ARINCO N:o 95.FI.16.001. Sisäasiainministeriö, Alueiden ja hallinnon kehittämisosasto.

- ESF reports and evaluations, Ministry of Labour

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Web pages

- Cordis: Suomi EU-ohjelmissa. http://www.cordis.lu/finland/fi/home.html - Ministry of Transport and Communications: http://www.mintc.fi - Ministry of the Interior: http://www.intermin.fi - Ministry of Agriculture and Forestry: http://www.mmm.fi - Ministry of the Environment: http://www.ymparisto.fi - Ministry of Labour: http://www.esr.fi - Ministry of Education: http://www.minedu.fi - Ministry of Trade and Industry http://www.ktm.fi - Environmental Administration: http://www.vyh.fi - The European Commission Representation in Finland: http://cgi.eukomissio.fi - The European Union: http://europa.eu.int - The Central Union of Agricultural Producers and Forest Owners: http://www.mtk.fi - The Central Organisation of Swedish Speaking Agriculture Producers http://www.slc.fi - The Village Action Association of Finland: http://www.maaseutuplus.fi - Suupohjan kehittämisyhdistys ry: http://leader.suupohja.net - Ministry of Labour: http://www.mol.fi - Equal: https://equal.cec.eu.int/equal/jsp/index.jsp - Finnvera http://www.finnvera.fi - TEKES http://www.tekes.fi - Statistics Finland http://www.tilastokeskus.fi - Each Regional Council concerned, universities, T&E-centres etc.

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APPENDIX

Index of tables included in ANNEX II

FIMOS (Finnish Monitoring System), Monitoring Database for EU Structural funds objectives. Maintainer: The department of regional refunds, Ministry of the Interior, Finland Objective -programs Interreg R&D Innovation (TEKES – National Technology Agency of Finland) Regional State Aids

Ministry of Agriculture and Forestry CAP (includes LFA, environment and national funding)

Ministry of Transport and Communications Finland TEN

http//europa.eu.int/comm/environment/life/projects LIFE

Regional Council of Päijät-Häme Regional Council of South Karelia Regional Council of North Karelia Regional Council of Kainuu Regional Council of Häme Leader, SME, Pesca, Recite, Innovative Actions

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SWEDEN/SVERIGE:

REGIONS: NORRA MELLANSVERIGE ÖVRE NORRLAND

ELABORATION:

Author: Björn Hellqvist

From: BJÖRN HELLQVIST KONSULT AB. HAMMARÖ. SWEDEN

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDIES OF NORRA MELLANSVERIG AND ÖVRE NORRLAND. SVERIGE/SWEDEN

EXECUTIVE SUMMARY

We have in this case study analysed the impact from the Community policies on regional cohesion in Sweden mainly during the program-period 1995 – 1999.

Since the regional development is depending on the combined effects from all (!) sectors in society, with or without financial support from EU, we are facing an extremely difficult and challenging analytical task. We are striving for the understanding of the mechanisms behind the results obtained and impacts registered. In order to draw robust conclusions and present useful conclusions we need to understand them so well that we can propose efficient readjustments or fine-tuning of the separate programs or the combination of programs.

This case study shows that EU - during the period 1995 – 1999 - has contributed with 425 Meuro in the Northern Middle Sweden (NMS) and with 339 Meuro in Northern Sweden (NS) with direct and some indirect impact on regional development. In spite of this, the statistical analysis presented in this report, demonstrates an increased interregional gap in Sweden. The two NUTS II regions analysed, has both lost in comparison both with the average figure for Sweden and with the fastest growing region – Stockholm – between 1993 and 2000. The GRP in the studied regions has decreased from about 66 % of the GRP in Stockholm 1993 to 61 % in year 2000.

Diagram 1: GRP/Capita, Euro(1 ), current prices 1993 - 2000

50 Stockholm 40 d

n Average a 30 20 NMS hous t 10 NS 0 1993 1995 1997 1999

The same negative trend is presented for the development of population. Stockholm increased and NMS and NS decreased in population between 1995 and 2000.

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Diagram 2: Population growth 1995 - 2000

2000000

d 1500000

n NMS a s 1000000 NS ou 500000 Stockholms län Th 0

5 6 7 8 9 0 9 9 9 9 9 0 19 19 19 19 19 20 year

The first impression is that the regional cohesion policy has failed. The qualitative analysis gives another result. The overall judgement from the county Governors offices is that the contribution of the different Community policies has been positive or very positive. This result poses the counter factual question of what would have been the result on regional cohesion if the Community policies had not been implemented. It has not been possible within this case study to make any deeper analysis of the efficiency of the separate policies and definitively not of the impacts of the combined cohesion policy.

The evaluations that have been presented from the different EU-programs are generally positive concerning the results and impacts. One obvious conclusion is that the cohesion issue is dependent on important structural factors that need to be handled by comprehensive and long-range policies. The positive impression raises expectations about more visible and positive impacts on the regional cohesion from the present program period (2000 – 2005).

The Northern Sweden region has as an example, taken advantage of their RIS and RISE-projects to formulate strategies for regional innovation and the new information society. Those strategies have been used as a platform for a new program (bITs) Business Intelligence, Test bed and Spin outs, with financial support from the EU-initiative Innovative Regions. Also NMS has recently started a project – Innovative measures in NMS - partly inspired by a former transnational project (Entrée), with financial support from ERDF (Recite 2).

The qualitative judgements that were presented from the County governors offices indicate that an improved coordination between the different policies could be useful to improve the cohesion policy. Some other concrete measures are presented in this report on how this coordination could be implemented. Hopefully the data and opinions presented in this report can contribute to an increased awareness of this eternal issue of how to balance sector policies against a holistic approach. The general trend among analysts and policymakers seem to be towards a more holistic approach, although the structural resistance is still very powerful.

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INDEX

1 COMMENTS ON THE ACTIVITIES

2 CONTEXT AND BACKGROUND 2.1 NORTH OF MIDDLE SWEDEN (NMS) 2.2 NORTHERN SWEDEN (NS) 2.3 POLICIES FOR REGIONAL DEVELOPMENT AT THAT TIME (1995) AND THE EVOLUTION OF DEVELOPMENT MODELS

3 MAIN COMMUNITY POLICIES 3.1 A PALETTE OF PROGRAMS WITH SPATIAL IMPACTS 3.2 PROGRAMS FOR NORTH OF MIDDLE SWEDEN (NMS) 3.3 PROGRAMS FOR NORTHERN SWEDEN (NS)

4 ANALYSIS OF OUTCOME AND IMPACT ON REGIONAL AND SOCIAL COHESION 4.1 QUANTITATIVE ANALYSIS –GRP-, POPULATION AND EMPLOYMENT GROWTH 4.2 SOME EXPLANATORY FACTORS 4.3 RESULTS AND IMPACTS FROM THE EU PROGRAMMES

5 COORDINATION AND GOVERNANCE 5.1 QUALITATIVE JUDGEMENTS FROM THE COUNTY GOVERNORS

6 CONCLUSIONS AND GUIDELINES

APPENDIX

Index of tables included in ANNEX II

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Index of Diagrams and Tables

Diagram 1: GRP/Capita, Euro, current prices 1993 – 2000 Diagram 2: Population growth 1995 – 2000 Diagram 4.1: Long range population development in NMS and NS Diagram 4.2: Total employment 1993 – 2001 Diagram 4.3.a: Employment/sector in NMS Diagram 4.3.b: Employment/sector in NS Diagram 4.4: Employment rates 1993 – 2001 Diagram 4.5: Total unemployment 1996 – 2002 Diagram 4.6: Gross Fixed Capital formation, Millions Euro Diagram 4.7: Persons with post secondary education Diagram 4.8: Persons with post-graduate education Diagram 4.9: Newly started enterprises 1995-2000 Table 2.1: Geographical range of EU-programmes for North of Middle Sweden Table 2.2: Geographical range of EU-programmes for Northern Sweden Table 3.1: Budget means for regional development 2002, Meuro Table 3.2: Budget means for transport aid 1999 - 2002, Meuro Table 3.3: Resources (Meuro) for – direct and indirect – regional development in NMS Table 3.4: Budget means for regional development 2002, Meuro Table 3.5: Budget means for transport aid 1999 - 2002, Meuro Table 3.6: Resources (Meuro) for – direct and indirect – regional development in NS Table 4.1: GRP/Head Euro 1000 (exchange rate 8.5) current prices Table 4.2: Educational background among the population Table 5.1: Opinions from the State Governors officies

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1 COMMENTS ON THE ACTIVITIES

The present case study of the two Swedish NUTS II regions has been struggling with two main problems. The first is the complexity concerning EU-funding from different programmes and funds. Saying this does not implicate that the Swedish system would be a miracle of transparency. The problem is rather that it has evolved two complex and overlapping systems. The other problem has been the exhaustion among the regional actors from the overflow of evaluation studies. The second problem was handled by collecting as much information as possible from national databases and by using a relatively simple questionnaire.

Sweden consists of eight NUTS II-regions. The two regions that are studied in this report are North of Middle Sweden4 (NMS) and Northern Sweden5 (NS). They consists of three respectively two counties at the NUTS III-level. The division of Sweden into counties has a very long tradition and has up till now been very stable and has thereby been forming the structure of regional policy and official statistics in Sweden.

Due to the fact that the formation of the objective areas for the first program-period (1995 – 1999) in Sweden did not follow the geographical frontiers of the counties, but other socio-economic criteria, there are some methodological problems for the present analysis.

Another precondition is that the NUTS II-level is never represented in the analyses and evaluation reports that have been conducted regularly. The NUTS II-level is not used for the national sector planning, which complicates the collection of data, especially for the inputs contributing to economic and social cohesion.

We therefore, first of all, need to calibrate the information about the two regions concerned between the descriptions of the counties, taking account of the information given in first of all the program documents and evaluation reports for objective 2, 5b, and 6. The resources and impacts from the Interreg- and Leader II-initiatives6 will also be covered. We also have to aggregate the information given in the differing documents that mainly is structured at the county level (i.e. NUTS III-level).

A third problem has been to find persons that were in charge of or active in the program-period 1995 – 1999, especially from the organisations representing the social partners. The persons interviewed or asked to answer the questionnare are listed above:

Persons interviewed or contacted:

Mr Göran Theolin The state county office in Västerbotten Mr Gunnar Hedborg The state county office in Norrbotten Mr Sture hermansson The state county office in Värmland Mrs Monica Robin Svensson The state county office in Gävleborg Mrs Inger Eriksson The state county office in Dalarna Mrs Kristina Ossvik ESF-council Stockholm Mrs Cecilia Eng ESF-council Stockholm Mr Peter Malmsten Swedish National rural Development Agency Mr Roland Steen The Swedish Board of Agriculture

4 Norra Mellansverige (abbreviated NMS). 5 Övre Norrland (abbreviated NS). 6 Some other initiatives as the SME-initiative and Fourth Framework for research are not elaborated in this report.

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The statistical sources used are:

SCB - www.scb.se (Statistics Sweden) Nutek – www.nutek.se (Swedish Business Development Agency) Jordbruksverket – www.jbv.se (The Swedish Board of Agriculture) Ekonomistyrningsverket – www.esv.se (The Swedish National Financial Management Authority) Högskoleverket – www.hsv.se (National Agency for Higher Education) Glesbygdsverket – www.glesbygdsverket.se (Swedish National Rural Development Agency) and final reports and evaluation reports from the structural fund programmes 1995 – 1999.

The amounts in Swedish crowns has been transferred to Euro with the exchange rate of 8,5.

2 CONTEXT AND BACKGROUND

Two - in geographical terms - very large NUTS II regions were selected as Swedish cases. They were North of Middle Sweden (Norra Mellansverige) (NMS) and Northern Sweden (Norra Sverige) (NS). There location is showed in the map below.

Northern Sweden (NS) SE081 and SE082

North of Middle Sweden (NMS) SE063 SE062 SE061

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There is no political power whatsoever connected to the NUTS-II level. At the NUTS III-level has the county council, running first of all health care-business, political power by their right of taxation. At the same level, the interest of the state is taken care of by the state governor and his office. The traditionally dominating role at the county level (NUTS III) played by the state governors recently has been challenged by differing political bodies. The Swedish government has allowed a number of experiments with decentralisation of political power from the state governor to the regional elected political bodies. None of these experiments is located at the two regions treated in this study.

2.1 NORTH OF MIDDLE SWEDEN (NMS)

North of Middle Sweden consists of three counties, Värmland, Dalarna and Gävleborgs län. It is a large NUTS-2 region (15% of the total area in Sweden) and it is relatively sparsely populated. The Gross regional product per head (GRP/head) was in 1995 72 % of the GRP/head for the leading region in Sweden (Stockholm).

The total employment was 368 400, which corresponds to 69 % employment rate. The total unemployment was high and corresponded to 13,2 %. Since Sweden has been practicing a very active labour market policy a relatively large share of the total unemployment consists of persons in active labour market measures. The percentage of the labour force that were activated in different labour market programs were 5,1 %

A general characterisation of North of Middle Sweden would be that it was an indus- trialised region, mainly dominated by steel- and wood-industry. The region had also witnessed an ongoing restructuring of the base-industries and a loss of population. A high percentage, about 35 %, was employed within the public sector.

NMS had a relatively small agricultural sector. The agricultural units (enterprises) were - at least in EU-terms –relatively small and to a large extent combining animal and vegetable production. In some parts of the region the units also combined their production with forestry. Less than 2 % of the employment (6 681 full-time equivalent persons steadily employed in agriculture in 1999) was found in the agricultural sector.

Facts North of Middle Sweden 1995

3 counties

41 municipalities

Population: 862 000

Persons/km2: 12,5

GRP/head: 21 880 Euro

Employment rate: 69 %

Open unemployment rate: 8,1 % (1996)

Persons in/with

* active labour market measures: 5,0 %

* graduate education:12,2%

* post graduate education:1,3 per mill

The SWOT-analyses that were carried out in the preplanning for the SPD´s pointed out the mixed character for the three counties concerned. The result of the analysis and negotiation with the Commission was that all three counties got municipalities belonging to objective areas 2, 5b and 6. This indicates a mixture of sub-regions dominated by traditional

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industrial branches, together with sub-regions dominated or at least heavily dependent on agricultural activities as well as some sparsely populated sub-regions.

In the evaluation of EU-funding, the picture is even more complicated since two of the counties, Värmland and Dalarna, also were concerned by the Interreg-programme. We also need to identify the funding and the impacts from EU programmes 3 and 4. Besides those programmes the two regions has been active in another number of Community initiatives. Table 1 summarizes the connection between the three counties and the most important EU- programmes. It could be noted that the main cites in Värmland (Karlstad), Dalarna (Falun) and Gävleborgs län (Gävle) was outside all the geographical objective areas.

Table 2.1: Geographical range of EU-programmes for North of Middle Sweden Objective 2 Objective 5 Objective 6 Interreg Objective 3 Objective 4 Leader II 5 5 1 6 16 16 6 Värmland municipalities municipalities municipality municipalities municipalities municipalities municipalities 6 4 5 2 15 15 6 Dalarna municipalities municipalities municipalities municipalities municipalities municipalities municipalities 2 2 1 10 10 Gävleborg - municipalities municipalities municipality municipalities municipalities

2.2 NORTHERN SWEDEN (NS)

Northern Sweden consists of two counties, Västerbotten and Norrbotten, with their fifteen respective fourteen municipalities. NS is the largest NUTS-II region in Sweden, corresponding to more than 1/3 of the total area in Sweden. In 1995 the total population was 526 000 which implicates an extremely low population density for large parts of the region. The GRP/head was 22 590 Euro, which was a bit higher than figure for North of Middle Sweden, but “only” 74 % compared with the leading region.

The total employment in NS was 231 400 in 1995, which corresponds to an employ- ment rate of 69 %. The situation on the labour market differs between the two counties. Norrbotten - furthest north - has a bit lower employment rate and a higher rate of unemployment. The open unemployment for the whole region was 8,7 %, but Norrbotten had an open unemployment rate of 10, 2 %. The same difference could be noted concerning persons in active labour market measures.

The socio-economic character of Northern Sweden is slightly more coherent compared with North of Middle Sweden. The dominating city in Västerbotten, the university-city of Umeå was not included in the geographical objective areas. On the other hand was Luleå included in Norrbotten.

A general characterisation of Northern Sweden would be that it was – and still is - an industrialised region, mainly dominated by forestry, mining, steel- and wood-industry and hydro electrical industries. The region had also witnessed an ongoing restructuring of their base-industries and a severe loss of population. Compared to NMS was an even larger share of the total employment (40 %) in the public sector. No more than 3 360 full-time equivalent persons were employed in the agricultural sector, which corresponds to 1,5% of the total employment.

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Facts Northern Sweden 1995 2 counties, 165 000 km2 (40% of Sweden’s and 5% of EU´s total area) 29 municipalities Population: 526 000 2 Persons/km : 3,2 GRP/head: 22 590 Euro Employment rate: 69 % Open unemployment rate: 10,2 %(1996) Persons in/with * active labour market measures: 5,3 %

Table 2.2: Geographical range of EU-programmes for Northern Sweden Objective Objective 2 Objective 6 Interreg Objective 3 Objective 4 Leader II 5b 11 3 11 15 15 15 10 Västerbotten municipalities municipalities municipalities municipalities municipalities municipalities municipalities 13 13 14 14 14 4 Norrbotten - municipalities municipalities municipalities municipalities municipalities municipalities

2.3 POLICIES FOR REGIONAL DEVELOPMENT AT THAT TIME (1995) AND THE EVOLUTION OF DEVELOPMENT MODELS

Both NMS and NS had witnessed a severe restructuring and loss of population during a long period of time before the entrance to EU. The Swedish government had tried different sorts of measures to counteract the increasing imbalances between different regions in Sweden. The membership in the EU and its implications for the regional policies and its implementation did not – in the beginning of the first program-period - seem to be fully understood from all actors concerned7. It took more than a year before most of the actors could grasp the new system for regional policy.

During the period studied (1995 – 1999) the Swedish government initiated a series of different new policies. Some of them were obviously influenced by the EU-policies for regional cohesion and development. In 1997 the Governors8 were obliged to try to support a more coordinated policy for regional development. Shortly afterwards, 1998/99, the government initiated an analysis9 of the “regional growth capital” in the counties. Other initiatives, mainly within the field of labour market, were based in the Swedish policy- tradition of active labour market policies.

In 1999 the preparations for the first generation of regional growth contracts started. Besides the influences mentioned above, this initiative markedly was influenced by the experiences of the use of good partnerships in planning and implementation of regional policies.

7 The Commission until 1996 did not approve many of the programmes. 8 The initiative was designated the Governors mission. 9 This initiative could presumably be traced back to the trends forming the EU-policies and the ongoing debates among professional economists and geographers about the new theories of endogenous growth.

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A complete and theoretically proper analysis of the impact of the different policies and the interplay between the different policies is out of range for this case study. But, in order to not “let the best be the enemy of the good”, we can base our descriptive analysis on the best practice for evaluation of regional policy. We therefore, in accordance with the basic idea for the project in which this case study belongs, will describe (as comprehensive as possible) the direct, as well as some indirect policy programmes that has been conducted during the period 1995 – 1999/2000.

The following policy domains will be studied or touched upon:

regional policy labour market policy (overarching) agricultural policy educational policy (overarching) environmental policy R&D policy Transport policy

The manner to describe and talk about regional policy in Sweden was during the period concerned gradually changed from the traditional re-distributional approach, to a new way to talk about the “small” regional policy (direct regional policy) and the “large regional policy” aiming at growth. The large regional policy included all the mayor sector policies with spatial consequences.

The expansion of the public sector in Sweden, and the accompanying increases in employment, during the after war-period led to an even distribution of the employment opportunities over the whole country. This “positive” impact was reversed during the 1990-th when the public sector (mainly the activities run by the state) began to shrink. There were no quantitative objectives for the regional development policy clearly specified for the counties or NUTS-II regions in Sweden, at the time when the structural funds were introduced in Sweden. The traditional regional policy in Sweden was mainly based in the idea of a fair distribution of public utilities and a vision of life in all regions (“Let all of Sweden live”).

In 2001/2002 the Swedish government and the parliament officially integrated the earlier regional policy and regional business policy to a new growth oriented regional development policy.

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3 MAIN COMMUNITY POLICIES

3.1 A PALETTE OF PROGRAMS WITH SPATIAL IMPACTS

3.1.1 Regional development policies

We will first describe the regional development policy that is directly linked to EU´s structural funds (ERDF,ESF and EAGGF) and programmes 2, 5b, 6 and the initiatives Interreg and Leader.

The Swedish national programmes for regional development will be presented briefly, with some statistics for year 2002 and some parts for the period 1997 – 2001. The national programmes for regional development consisted of

Regional development contribution (mainly investment aid) SME-aid Selective employment aid Seed finance Aid for commercial service (in rural areas) Regional projects

The programme financing “Regional projects” has been used for the state co-finance of EU-projects financed from ERDF).

3.1.2 Regional impacts of labour market and social policies

We will also - in a summarized way – describe the labour market and social policies connected to ESF and objectives 3 and 4. The Swedish tradition with an active labour market policy was during the studied period influenced in the direction of decentralisation. The dominant10 problem during those years, especially the first years, was the large unemploy- ment. The Swedish policy was due to this background designed to give the regional and local authorities wider frameworks to increase and support growth of employment. Relatively large amounts of co-financing were found for the programs 2, 5b and 6 during his period. It was clearly demonstrated in the analysis of the “regional growth capital” that very large amount of economic resources were transferred to the regions via the labour market policies, including the resources from the labour market insurance. It is not possible to make any deeper analysis of the total impact of labour market policies in this study.

3.1.3 Regional impacts of agricultural policy

The agricultural policies and the connection the EAGGF will be described and commented upon.

The total agricultural policy consisted of the following programmes:

- Acreage- and animal-aid, which was financed with 100 % from AGGAF

10 The Commission took in 1996 the initiative launch the territorial employment pacts to combat the unemployment problem. The county of Värmland was the only part of the two studied NUTS-II regions that were active within this initiative.

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- different environmental-aids to the agricultural sector that were financed with 50% - aid for investments, start-ups etc was financed with 25 % from AGGAF - Rural area aid

The “rural area aid” was financed via the state programmes for regional development

3.1.4 Regional impacts of transport policy

Sweden has had a special transport aid, motivated by the long transport distances to and from some regions in Sweden. The purpose with the aid is to increase the com- petitiveness for companies within the specified areas. Since NS is located up north in Sweden the main part of this state aid has gone to companies in NS.

The most important regional impacts, within the field of transport-policy, can be regis- tered from the investments in physical infrastructure such as roads, railways and airports. During the program-period 1995 – 1999, only negligible parts of the structural funds were used for investments in physical infrastructure.

3.1.5 Regional impacts of other policy areas

As a complement we will present some figures and make some comments to the development within the educational and the development of private investments that we claim to be of importance in an analysis of the regional development in Sweden during the period 1995 – 1999.

It is not possible to cover the wide range of programmes and initiatives during the studied period. One example of an important initiative used by Northern Sweden was RIS (Regional Innovation Strategy) and RISE (Regional Information Society Initiative). The result of using those initiatives has been, among other possible effects, the formulation of a new project (bITs) Business Intelligence, Test bed and Spin outs, with financial support from the EU-initiative Innovative Regions.

We will present the data and some comments for each sector for each of the studied NUTS-II regions.

3.2 PROGRAMS FOR NORTH OF MIDDLE SWEDEN (NMS)

3.2.1 Regional development policy for North of Middle Sweden (NMS)

NMS was connected to all geographical objective areas. It could be of some interest to briefly describe and analyse the objectives and indicators that were presented in the respective program documents. Let us start with Objective 5b.

Objectives, indicators and budget for Objective 5b, Western Sweden

The overarching objective for Objective area 5b was to “stimulate development and restructuring in rural areas”. The programme specified four measures and four overarching objectives:

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1. Small and medium-sized business development “Creating conditions for a long- (43%) ranging, differentiated and competitive industrial life in the region and a secured and growing employment” 2. Development and diversification of the agricultural “.. by developed technique, new sector (25%) products and markets create profitable and competitive firms within the agricultural sector ..” 3. Tourism and culture (20%) “increase employment within tourism and culture and strengthening of the regional identity” 4. Communications and local development (10%) “to improve accessibility and develop IT-related activities strengthening the self-esteem and … identity among the rural population”

A relatively large number of indicators were presented, such as the number of new jobs, secured jobs and new firms. One example is the indicator “new jobs”. All together 1 750 new jobs should be created within the Objective 5b area Western Sweden. Since the municipalities within the NUTS-II region NMS had a population share of 68 % (of the total population in Objective 5b), the number of new jobs created by support from Objective 5b could be calculated to 1 190.

Since the allocation of budget means are not registered after municipality or county, it is impossible, without a deep investigation of the original sources to find the exact distribution after county borders. We choose the technique to use the share of population as the base for an informed estimation of the EU-funding from Objective 5b, allocated to North of Middle Sweden. The share of the total budget for Objective 5b, Western Sweden was – calculated in this way - 81 Meuro, with 13,7 Meuro from EU´s structural funds and the remaining part from different national co-financing sources.

The same type of estimation has to be done for Objective 5b, “Västerbotten, Gävle, Dala”. The number of municipalities in NMS belonging to this part of Objective 5b is six, which amounts to 46 % of the total number of municipalities. The share of the total budget for Objective 5b, Västerbotten, Gävle, Dala was – calculated in this way - 50 Meuro, with 7 Meuro from EU´s structural funds and the remaining part from different national co-financing sources.

Objective 2, Bergslagen: Budget, Objectives and indicators

Objective 2 Bergslagen covered four counties (parts of) and twenty-four municipalities. Thirteen municipalities in Objective 2 represented the NMS-region. This corresponds approximately to 55% of the total region for Objective 2 Bergslagen. Since the allocation of budget-means is not registered after county or municipalities is it impossible to give the exact amounts of EU-funding to the NMS-region. An informed estimation is that the allocation to NMS corresponds rather well to the percentage share of population for the municipalities that belongs to NMS. This share is 55%, which indicates that the amount of structural funds means to NMS was approximately 39 meruo. The share of the total budget

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FINAL REPORT (ANNEX I) for Objective 2 Bergslagen for NMS is calculated to an amount of 147 Meuro for the period 1995 – 1999. The funding from the structural funds ERDF and ESF amounted to 39 Meuro.

The overarching aim for Objective 2 was to “support the development and restructuring of the regional industries”. The main measures that were introduced in the programme were

Measure Indicator (examples) NB. For the whole region

Renewal of industrial environments 500 temporary jobs Extended labour markets 10 pilot projects Improved competitiveness among SME 7 000 new jobs and 700 new firms Improved vocational training Improved competence within the private businesses Education for 10 000 persons Tourism and regional identity 2 100 new jobs and 350 new firms

Objective 6: Budget, Objectives and indicators

Objective 6 in Sweden covered seven counties (parts of) and forty-three munici- palities. All three counties in NMS and both counties in NS were partly covered. Seven out of forty-three municipalities in NMS were covered by objective 6. Of those were one in Värmland, one in Gävleborg and five in Dalarna.

The programme were built up around six measures, as described below:

Measure Indicator (examples) NB. For the whole region

Business development 900 new firms Competence development Agriculture and fishery Local development Development of the Same-society Infrastructure

The stated overall objective was to reduce the gap in GRP between the region and the average national figure. The total budget for Objective 6 amounted to 756,5 Meuro, with structural fund means of 233 Meuro. Since the allocation of budget-means is not registered after county or municipalities, is it impossible to give the exact amounts of EU-funding to the NMS-region. An informed estimation is that the allocation to NMS corresponds rather well to the percentage share of population for the municipalities that belongs to NMS. This share is 16% and indicates that the amount of structural funds means to NMS was approximately 37 Meruo.

Interreg II A –Inner Scandinavia

Interreg IIA was designed to support cross-border collaboration and development. Eight of the municipalities in NMS were integrated in the programme. The total budget amounted to 23,5 Meuro (including the Norwegian part). The ERDF part was 4,7 Meuro and the national (Swedish) co-financing amounted to 7 Meuro.

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Leader II

The Leader-initiative was represented in NMS by two projects, Leader Värmland, Leader Dalarna and Leader Middle-Sweden. Their main objective was to strengthen the rural development by projects and activities that were locally initiated, innovative and network- oriented. The total budget amounted to 9,1 Meuro, with finance from EU-funds (Social, Regional and Agricultural) with 3,2 Meuro.

National regional policy measures

The amount for “Regional development contribution” for NMS was 63,1 Meuro during the period 1997 – 2001. The rural development aid amounted to 48,1 Meuro for the same period. It has not been possible to collect yearly data for the other smaller programmes for regional development. The budget means allocated to NMS for year 2002 for all regional development programmes is presented in table 3.1.

Table 3.1: Budget means for regional development 2002, Meuro Värmland Dalarna Gävleborg NMS Regional 5,9 6,8 1,5 14,2 development contribution11 Rural develop- 2,8 3,2 4,8 10,8 ment aid SME-aid 0,04 0 0,09 0,13 Selective 0 1,2 0,44 1,64 employment contribution Aid for 0,33 0,14 0,22 0,69 commercial services Regional 5,1 5,6 11,5 22,2 project activities Total 14,17 16,94 18,55 49,66

3.2.2 Labour market and social policy for Northe of Middle Sweden (NMS)

Objective 3: Objective, Budget and impacts

The measures for Objective 3 were directed towards competence, new ways for employment, start-ups and matching. The target groups were long-term unemployed, handicapped, young people and immigrants. The partnerships in the respective counties formed their own programs, based on the general guidelines. Objective 3 was integrated in Objective 6. The total amount from ESF was 319,3 Meuro, with a national co-financing of 480 Meuro.

Objective 4: Budget, Objective and impacts

The main focus within Objective 4 was to stimulate development of competence among employed in small and medium sized companies. Another objective was to increase the adaptability among the SME´s in the regions. Objective 4 was integrated in Objective 6.

11 Part of those amounts were decided at the national level (Nutek). This explains the difference between the figures in table 3.1 and 3.3 below.

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The total amount from ESF was 618,2 Meuro, with a national co-financing of approximately the same amount.

3.2.3 Agricultural development policies

The well-known fact that the aid to the agricultural sector is very high is clearly demonstrated in table 3.3. The acreage- and animal-aid was financed with 100 % from AGGAF. The different environmental-aids to the agricultural sector were financed with 50% and the aid for investments, start-ups etc was financed with 25 % from AGGAF.

The different aids from AGGAF are aggregated in table 3.3. The national co-financing is summed with the national aid that was financed nationally to 100 %.

3.2.4 Transport policy

Sweden has had a transport aid as a regional policy contribution, with the aim to increase the competitiveness within the specified areas. The aid is motivated by the high transport costs caused by the long transport distances in Sweden. Table 3.2 summarises the state financial transport aid.

The investments in hard infrastructure as roads, railways, airports and harbours have during a long period been dominating the debate about the regional development in Sweden. Especially the investments and reinvestments in roads are high on the political agenda. Due to the financial problems that the Swedish economy did undergo during the period 1995 – 2000, the budget for road-investments were reduced.

Table 3.2: Budget means for transport aid 1999 - 2002, Meuro 1999 2000 2001 2002 Värmland 0,48 0,25 0 0 Dalarna 0,12 0,06 0 0 Gävleborg 0,62 0,35 0,23 0 NMS 1,22 0,66 0,23 0

NMS was out-phased of the area that could receive transport aid, due to changed regulations. The total amount is relatively small in NMS, compared to NS (se 3.3.4 below).

3.2.5 Impacts from other sector policies

The “investments” in education is regarded as one of the most profitable and appro- priate measures for political intervention in the market economy. The educational level among the population is an indicator often used in regional development studies. The population in NMS had, which is analysed in section 4.2, a low educational level. Table 3.3 contains data for the amount of state financing of higher education in NMS. The figures correspond to the finance of direct costs for higher studies at the universities and university branches in NMS.

In NMS has as an administrative region no common need of very large infrastructure investments. Some general needs that are presented from the counties is strengthened east- west road links.

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The environmental policy in Sweden was given high priority in the policy statements from the government. There were also some new political initiatives taken to use labour market measures in the environmental sector. In the action plan for the territorial Employment Pact in Värmland, development of Green Markets was one of the focus-areas.

Table 3.3 below summarizes the amounts coming from EU structural funds as well as national funding sources. Since the resources allocated and used within the ongoing structural fund programmes (Objective 1, 2, 3 and different initiatives) is very difficult to get hold on, table 3.3 is incongruent between the different budget lines.

It must also be underlined that there are some very important flows of financial resources - with obvious impact on the regional cohesion development - that not are included in the table. The most important are

costs for labour market measures tax levelling between municipalities and county councils

Table 3.3: Resources (Meuro) for – direct and indirect – regional development in NMS economic 1995 1996 1997 1998 1999 sum aid/year objective 2 (x) x x x x 39,0 (eu) objective 5b (x) x x x x 20,6 (eu) objective 6 (x) x x x x 37,0 (eu) objective 3 (x) x x x x 35,4 (eu) objective 4 (x) x x x x 57,2 (eu) interreg ii a (x) x x x x 4,7 (eu) leader (x) x x x x 3,2 eu-support to 40,3 43,2 47,4 49,5 47,7 228,1 agriculture “TOTAL” 425,2 EU-aid 1995 1996 1997 1998 1999 2000 2001 2002 sum national aid to 23,6 26,7 17,6 23,6 28,1 29,8 regional development (decided at county level) national aid to 21,8 26,3 31,4 34,1 34,7 148,3 agri-culture national 72 73 83 89 106 112 145 finance of higher education national 1,22 0,66 0,23 0 funding of transport aid

Observe that the costs for labour market measures are not included in table 3.3, which implicates that the national co-financing for objective 3 etc. is underestimated.

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3.3 PROGRAMS FOR NORTHERN SWEDEN (NS)

3.3.1 Regional development policy for NS

NS was also connected to all geographical objective areas. Even though the different geographical areas for objective 2 and 5b had their own SPD´s, one could regard those programmes as qualitatively the same. We can thereby refer to the description given I section 3.2 for objectives 2, 5b and 6. The Interreg-initiative was represented in NS by Middle Scandinavia (Kvarken + Nordkalotten + Barents).

Objective 5b, Västerbotten, Gävle/Dala: Budget Objectives and indicators

The number of municipalities in NMS belonging to this part of Objective 5b was three, which amounts to 23 % of the total number of municipalities. The share of the total budget for Objective 5b, Västerbotten,Gävle,Dala was – calculated in this way - 25 Meuro with 3,5 Meuro from EU´s structural funds and the remaining part from different national co-financing sources.

Objective 2, Norra Norrlandskusten: Budget, Objectives and indicators

The total out-payment for Objective 2, Norra Norrlandskusten was 110 Meuro. The EU- funding was 28 Meuro and the rest was national public and private co-financing.

Objective 6: Budget, Objectives and indicators

Objective 6 in Sweden covered seven counties (parts of) and forty-three munici- palities. Both counties in NS and both counties in NS were partly covered. Twenty-four out of forty-three municipalities in NS were covered by objective 6.

The total budget for Objective 6 amounted to 756,5 Meuro, with structural fund means of 233 Meuro. Since the allocation of budget-means are not registered after county or municipalities is it impossible to give the exact amounts of EU-funding to the NS-region. An informed estimation is that the allocation to NS corresponds rather well to the percentage share of population for the municipalities that belongs to NS. This share is 52 % and indi- cates that the amount of structural funds means to NS was approximately 121 Meruo.

Interreg II A – Middle Scandinavia (Kvarken + Nordkalotten + Barents)

Interreg IIA was designed to support cross-border collaboration and development. All municipalities in Västerbotten were included in Kvarken and the county of Norrbotten was included in Nordkalotten and Barents. The total budget for Kvarken amounted to 21 Meuro (including the Finnish and Norwegian part). The EU-funding amounted to 7 Meuro (with the estimation that 50% of the resources were spent in Sweden) and the national (Swedish) co- financing amounted to 4,7 Meuro. The same figures for Nordkalotten are 5 Meuro EU-funding and for Barents also 5 Meuro. All together the EU-funding amounted to 13,5 Meuro.

Leader II

The Leader-initiative was represented in NS by 3 projects, Leader Inland, Leader Woodland and Leader Urban and Rural. The total budget amounted to 6,2 Meuro, with finance from EU-funds with 3,4 Meuro.

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National regional policy measures

The amount for “Regional development contribution” for NS was 80,3 Meuro during the period 1997 – 2001. The rural development aid amounted to 43,3 Meuro for the same period. It has not been possible to collect yearly data for the other smaller programmes for regional development. The budget means allocated to NS for year 2002 for all regional development programmes is presented in table 3.4.

Table 3.4: Budget means for regional development 2002, Meuro Västerbotten Norrbotten NS Regional 10,2 14,7 24,9 development contribution12 Rural develop- 4,9 2,3 7,2 ment aid SME-aid 0 0,01 0,01 Selective 0,9 5,1 6,0 employment contribution Seed finance 0,2 0 0,2 Aid for 0,5 0,6 1,1 commercial services Regional 16,3 12,5 28,8 project activities Total 33,0 35,21 68,21

3.3.2 Labour market and social policy for Northern Sweden (NS)

Objective 3: Objective, Budget and impacts

Since Objective 3 was integrated in Objective 6 is the amount registered for Objective 3 in NS relatively low. The total amount from ESF was 15,7 Meuro.

Objective 4: Budget, Objective and impacts

Objective 4 was also integrated in Objective 6. The total amount from ESF was 31,6 Meuro, with a national co-financing of approximately the same amount.

3.3.3 Agricultural development policies

The different aids from AGGAF are aggregated in table 3.6. The national co-financing is summed with the national aid that was financed with 100 %.

3.3.4 Transport policy

Sweden has had a transport aid as a regional policy contribution, with the aim to increase the competitiveness within the specified areas. The aid is motivated by the high transport costs caused by the long transport distances in Sweden. Table 3.5 summarises the state financial transport aid.

12 Part of those amounts were decided at the national level (Nutek). This explains the difference between the figures in table 3.4 and 3.6 below.

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Table 3.5: Budget means for transport aid 1999 - 2002, Meuro 1999 2000 2001 2002 VÄSTERBOTTEN 16,6 16,8 20,7 18,1 NORRBOTTEN 10,8 11,2 13,2 13,3 NS 27,4 28,0 33,9 31,4

The total amount for transport aid is high for NS. The long distances for the companies located in northern Sweden give the obvious explanation for this large aid.

Traditionally the northern part of Sweden has been given high support by heavy investments in the physical infrastructure. NS has also given high priority to the environmental issues. The most important and heavily debated project concerns the investment in a new railroad – Bottniabanan - between Kramfors in the middle of Norrland up to Umeå in NS. About 40% of the total investment that is calculated to 1, 2 milliard Euro belongs to NS. The project is the largest railroad-project in modern time in Sweden and will give 190 km new railroad, 140 bridges and 25 km tunnel. The basic motives given are improved accessibility for person- as well as goods transport. During the construction-period from 1999 to 2008 will the investment give 8 000 man-year.

3.3.5 Impacts from other sector policies

The educational level was higher in NS compared to NMS (see table 4.2 below). During 1995 – 1999 the educational level was raised, in NS as well as in NMS.

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Table 3.6: Resources (Meuro) for – direct and indirect – regional development in NS Economic 1995 1996 1997 1998 1999 SUM aid/year Objective 2 28,0 Objective 5b 3,5 Objective 6 121,0 Objective 3 15,7 Objective 4 31,6 Interreg ii a 13,5 Leader 3,4 Eu-aid to agri- 21,7 22,6 25,0 26,6 26,0 121,9 culture “Total” 338,6 Eu-aid MEURO 1995 1996 1997 1998 1999 2000 2001 2002 SUM National aid to 28,8 29,2 19,3 26,7 33,6 32 regional development (decided at county level) National aid to 12,0 28,7 32,3 33,4 33,3 agri-culture National aid to 218 213 226 229 253 268 292 higher education National 27,4 28,0 33,9 31,4 funding of transport aid

4 ANALYSIS OF OUTCOME AND IMPACT ON REGIONAL AND SOCIAL COHESION

4.1 QUANTITATIVE ANALYSIS –GRP-, POPULATION AND EMPLOYMENT GROWTH

One central indicator in the evaluation of the cohesion policy is the Gross Regional Product (GRP). That the gap between the most prosperous regions in Sweden (Stockholm) and the NMS-region and NS-region widened during 1993 to 2000 was showed in Diagram 1 above. Table 4.1 gives the details such as that in 1993 were GRP for NS 94 % of GRP for Sweden and 68 % of GRP in Stockholm. In 2000 the percentage share had been reduced to 85 and 61 %. The development was for NMS was also negative, even if it was slightly better. Their GRP fell from 88 to 85 % of the average figure for Sweden and from 64 % of the Stockholm-GRP down to 61 % in 2000.

Table 4.1: GRP/Head Euro 1000 (exchange rate 8.5) current prices 1993 1994 1995 1996 1997 1998 1999 2000 STOCKHOLM 28,7 29,3 30,7 32,1 33,9 35,9 38 40,6 AVERAGE 20,8 22,1 23,6 24,2 25,2 26,2 27,6 29,2 NMS 18,4 20 21,9 21,8 22,2 22,9 23,9 24,7 NS 19,5 20,8 22,6 22,5 22,9 23,6 23,9 24,8

The long run development pattern for the population in NMS and NS is described in diagram 4.1. The total population has been rather stable. It must be noted that the total

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FINAL REPORT (ANNEX I) population decreased in NMS and NS between 1995 and 2000 with 3,5 % and 2,7 %. During the same period the population increased with more than 5 % in Stockholm. The NMS lost in absolute figures 30 000 persons between 1995 and 2000. This loss of population was explained by negative migration (minus 2 100/year) and a large deficit in birth/death rate. It might be noted that one of the counties in NS (Västerbotten) had a positive migration in the beginning of the period, which was however changed to a rather large deficit in 1999 and 2000. The figures are even worse since the out-migration is mainly among the young generations.

During year 2000 the loss of population in the small the municipalities Pajala, Över- torneå, Arjeplog, Överkalix, Storuman and Vilhelmina in Norrbotten (in NS) were the highest in Sweden. One noticeable exception was Haparanda which is closely related to the municipality of Torneå in Finland. Of the fifteen municipalities with the most negative population development in Sweden during the period 1996 – 2001, were nine located in NMS or NS. The rest of the municipalities were found in the other part of northern Sweden (mainly objective 6-area).

Diagram 4.1: Long range population development in NMS and NS

1000000

800000

600000 NS 400000 NMS

200000

0 1970 1975 1980 1985 1990 1995 2000

Also the third indicator, total employment, demonstrates negative cohesion-figures. Diagram 4.2 illustrates clearly how the regional differences increased during the 1990-th. NMS and NS increased their total employment with 2 – 3%. This is comparison with Stockholm, which increased its total employment with 11 %.

Diagram 4.2: Total employment

1400000 1200000 1000000 NMS 800000 NS 600000 Stockholm 400000 200000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001

Diagram 4.3.a and 4.3.b illustrates how the employment pattern in NMS and NS has changed during the nineties. Especially NMS has lost a great part of its employment in the industrial sector, even though we know that the statistics can be misguiding since a part of the increase in services are services outsourced from the industrial firms. Both NMS and NS have witnessed a continuing decrease in agriculture.

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Diagram 4.3.a: Employment/sector in NMS

3000 2500 Agriculture 2000 1500 Industry 1000 500 Services 0 Employed (100) NMS NMS NMS NMS

1987 1992 1997 2002

Diagram 4.3.b: Employment/sector in NS

2000

1500 Agriculture 1000 Industry Services 500 Employed (100) 0 NS NS NS NS 1987 1992 1997 2002

The employment rate has increased in NMS and NS since 1997 (see diagram 4.4). The Swedish government has declared the goal to reach the employment rate of 80%.

Diagram 4.4: Employment rates

71 70 69 68 67 NMS 66 65 NS 64 63 62 61

1993 1994 1995 1996 1997 1998 1999 2000 2001

Diagram 4.5 illustrates the relative differences on the Swedish labour market. The total unemployment was twice as high in the most remote region during the recession in the beginning of the nineties. Although following the same trend one can notice that the total unemployment is three times as high in Norrbotten in NS, in the beginning of this decade. This indicates the relatively high rigidity in the Swedish labour market.

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Diagram 4.5: Total unemployment

18 16 Värmland 14 Dalarna 12 Gävleborg 10

% Västerbotten 8 6 Norrbotten 4 Riket 2 Stockholm 0 1996 1997 1998 1999 2000 2001 2002

For all four indicators we can register a negative pattern of development, considering regional conversion within Sweden. So far we can draw the conclusion that the cohesion policy has not been able to support a convergence between the regions in Sweden. What we do not know is whether the cohesion policy has contributed to a better development record compared to a theoretical scenario without the aid and other support that has been put in. This question of “counter factual” is not possible to answer without very rigorous comparative analysis and proper datasets. We will present some complementary statistics in the following section, trying to shed some light over this regional policy dilemma.

4.2 SOME EXPLANATORY FACTORS

We will try to shed some light over the negative development pattern that was demon- strated in section 4.1. We will present some data over the investments in fixed capital and human resources.

4.2.1 Physical investments

The investment in fixed capital was in practice constant in NMS and increased slightly in NS, while the investments in Stockholm increased by 45% between 1995 and 1999. The share of total capital formation for NMS decreased from 10% in 1995 to 7 % in 1999. NS maintained their share of 6 %.

Diagram 4.6: Gross Fixed Capital formation, Millions Euro

12 000 10 000 8 000 Stockholm 6 000 NMS 4 000 NS 2 000 0 1995 1996 1997 1998 1999

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One example of projects aiming at improving the physical infrastructure, supported by EU is presented below.

North Calotte transport system reviewed

The North calotte is a geographically isolated part of Northern Sweden. The lack of an adequate transport system between the East and the West contributed to this isolation. In June 1997 a project was launched by a joint transport partnership Arctic Rail express (ARE) with financial support from the European Community. Charting of the transport market, the identification of physical and administrative obstacles and establishments of partnerships laid the basis for setting up a joint secretariat in 1999, with the main task to work out a combined master plan for logistics and infrastructure.

More information: [email protected]

4.2.2 Human investments

The investments in higher education, measured as the direct state funding of univer- sities in the NMS and NS, was registered in table 3.1 and 3.2 above. Diagram 4.7 shows that the increased “investments” in higher education is not automatically matched by any significantly growth in the number of persons with post-secondary education in NMS and NS. This is the case for the Stockholm-region.

Diagram 4.7: Persons with post secondary education

250000 200000 150000 NMS 100000 NS 50000 Stockholm 0 Stockholm NMS 1995 1996 1997 1998 1999

Table 4.2 shows distribution of the population in three educational categories, low, medium and high. NS has a higher percentage of the population with high education compared to NMS. Both regions have improved their educational records during the second half of 1990´s. A large share of the increased number of persons with higher education is working within the public sector, mainly education (including kindergarten) and the health care and elderly care sectors. One might expect that the shares of staff with higher education within the industrial and private service sectors in NMS and NS are lower compared to the average and the most expansive regions in Sweden.

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Table 4.2: Educational background among the population NS NMS Low Medium High Low Medium High 1995 30 49 21 37 46 17 1996 29 49 22 36 47 17 1997 29 49 22 35 47 18 1998 28 49 23 35 47 18 1999 27 49 24 34 47 19

Diagram 4.8: Persons with post-graduate education

16000 14000 12000

10000 Stockholm 8000 NMS 6000 NS 4000 2000 0 1995 1996 1997 1998 1999

Diagram 4.8 presents the number of persons with post-graduate education. The statis- tics in 4.8 shows the same tendency as was presented in diagram 4.6. The number of persons with post-graduate education has increased significantly in the Stockholm-region, while there are only minor increases registered in NMS and NS.

4.2.3 Entrepreneurial climate

Diagram 4.9 shows that the number of newly started enterprises follows the same pattern in both NMS and NS in comparison with Stockholm. If we look at the frequency figures for 1999, we see that the number of establishments/1000 inhabitants are 10 for Stockholm compared with 5 for NMS and 4,5 for NS. Also the share of new enterprises is significantly higher in Stockholm compared with our regions. The same tendency, although not so marked, can be noticed in comparison with the national average figures. This indicates that the renewal of the economy in NMS and NS is to slow, and it implicates that the “investments” in entrepreneurial and innovative policies need to be upgraded in both NMS and NS.

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Diagram 4.9: Newly started enterprises 1995-2000

35000 30000 25000 Stockholm 20000 NMS 15000 NS 10000 5000 0

1995 1996 1997 1998 1999 2000

4.3 RESULTS AND IMPACTS FROM THE EU PROGRAMMES

4.3.1 Results reported in evaluation reports

The evaluation reports and the reports from the monitoring committees present the re- sults and impacts from the EU-programmes that were implemented during 1995 – 1999. We present only some general conclusions that have been presented at the programme-level. This means that we have no specific information of the impacts for the two regions that we are studying.

Objective 3: Impacts

The general conclusions – at the national programme level - that has been presented indicates that a majority of the participants had improved their chances to get an em- ployment (improved employability) and that the measures that was used were better than the traditional labour market measures.

Objective 4: Impacts

The national evaluation report summarises the result as rather sensationally good and that the effects for the companies is regarded as very profitable.

Objective 5b

The total number of new jobs reported within the Objective 5b area was 3 400, which indicates a very good goal-achievement. In the evaluation report from Objective 5b Western Sweden is the planned result concerning new jobs reported as 4 000 and a goal achievement of 85%. In the evaluation report is the uncertainty around the reported data and results underlined. The qualitative judgement in the evaluation report is that the number of visitors, created jobs and new firms etc are impressive.

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The conclusions about goal-achievement presented in the evaluation report says that:

- the programme has been efficient in the creation and processing of projects - there are great problems to evaluate the value for money - it seems that large coherent projects are more efficient than small scale projects

Concerning the regional effects of programme 5b the evaluators notes the local varia- tions in the implementation. Municipalities with a higher percentage of the population in urban areas have received a larger share of the funds. The most important explanation to this non-intended effect is traced back to the co-financing from the public partners. The inducement to collaboration is regarded to be of great value and the partnerships etc that has been formed could be a useful base for future development activities.

Objective 2

We illustrate the impacts presented by referring to objective 2 Bergsslagen. The over- arching objective was to create 9 500 new employment opportunities and the result registered is 6 850. In summary the programme has not achieved the goals set up, which implicates a rather low cost efficiency. On the other side are the qualitative results and impacts such as increased level of competence, more intense use of ICT and the increased cooperation between different actors in the region are all placed on the positive side of the accountants.

Objective 6

In the final report from Objective 6 is the fact that the programme has initiated a new and better form for co-operation and a new way to collaborate around a programme. Many of the new constellations and networks that have been established are still functioning and this is taken as an increased awareness of the need of co-operation in order to survive and challenge the tendency towards greater regional disparities.

In contrast to objective 5b and 2 have Objective 6 managed to reach the stated goals – at the programme level - concerning new employment and new businesses. One astonishing result is the figure 13 248 new employment opportunities compared to the programme goal of 5 700.

4.3.2 Good examples reported

The following examples of good practice from the EU programs illustrate the positive impacts that have been identified in the evaluation reports. Firstly is two examples presented from the educational sector.

Tele-training for entrepreneurs in Lapland

The Lapland region in NS has high unemployment and negative migration rates, among other factors due to lack of business development. In a co-operative project between the local employment offices and ALMI (a semi-state organization for development of SME) distance learning was used to teach management and business skills to young entrepreneurs. The initiative resulted in keeping more young people in the area and giving them necessary skills to take over old businesses or setting up new ones.

More information: [email protected]

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Both NMS and NS are as we saw in part 4.3.2 regarded as regions with a relatively low innovative capacity. Starting in the program period 1995 – 1999 and being complemented and strengthened during the new period 2000 – 2006 a number of projects has been initiated in NMS and NS. Let us present a couple of good examples.

Networking for innovators

One of the elements contributing to the problems in the North Calotte is the lack of innovation and support for investors. During the Europartenariat held in Luleå 1996 a Interreg project aiming at developing cross border co-operation by a network of inventors. The inventors were supported with services for the complete invention/innovation process. The initiative led to a large number of contacts and an increased knowledge and awareness of markets and different channels to reach those markets, besides the direct effects of new companies and jobs.

More information: [email protected]

Innovation in the far north

The northern sparsely populated regions of Finland and Sweden face similar problems and opportunities when it comes to innovation and technology. Within the attempts to spur innovation a border region project was – as part of EU´s Regional innovation Strategy RIS - initiated with the aim to create a sustainable platform for innovation. By using the two university and research centres in Oulu (Finland) and Luleå (Sweden) a large number of companies and another twenty high-tech centres from all over northern Sweden and Finland has been collaborating around innovation and entrepreneurship.

From 2002 a new program (bITs) Business Intelligence, Test bed and Spin outs, with financial support from the EU-initiative Innovative Regions, were launched in Northern Sweden.

More information: www.technopolis.com/ris

Entrée project

The county of Värmland and the municipality of Hagfors was, within Recite 2, participating in the trans-national project Entrée, together with regions in Germany, Finland and Greece.The lack of entrepreneurial skills and spirit in Värmland was clearly demonstrated in the project, with the aim to guide new entrepreneurs through the whole process up to new businesses. The project produced a lot of practical knowledge on how to foster and support innovative processes and entrepreneurs.

More information. County Governors office in Värmland + 46 54 197000

The County of Värmland has tried to combine the negative out-migration of young people with the shortages concerning entrepreneurship by supporting the organisation Communicare.

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Communicare

Communicare is a non-profit organisation with the vision to use the commitment and motivation of young people to form Värmland as an unique and vigorous region in Europe. Anchored in the county of Värmland, with the world as their arena is Communicare supporting young people to realise their dreams and ideas and thereby contribute to the vision of a prosperous region.

More information: www.communicare.nu

The same perspective seems to be the basis for the Support given to a project in Västerbotten by combining young entrepreneurship with environmental issues.

Engineering Environmental Entrepreneurship, with positive side effects

Two municipalities in Västerbotten (in NS) – Storuman and Sorsele – targeted innovative educational courses to stimulate young people to focus on environmental entrepreneurship. Besides the direct effects in creating new jobs in the targeted sectors, the percentage of young people from this part of NS going on to higher education was increased by 15 %.

More information: [email protected]

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5 COORDINATION AND GOVERNANCE

5.1 QUALITATIVE JUDGEMENTS FROM THE COUNTY GOVERNORS

The county governors in the five counties in NMS and NS were asked to make a number of qualitative value judgements about the impacts and value added concerning the regional development. Three out five governors had responded the questionnaire. The result is presented in table 5.1.

Table 5.1: Opinions from the State Governors officies Impact on the regional development from Negative Not at all Positive Very positive Objective 2, 5b, 6 and Interreg-funding 1 2 Objective 3 and 4-funding 1 2 EU´s agricultural funding 2 1 National agricultural funding 3 National programmes for the Environment 1 2 Direct national funding for Regional 1 2 development National investments in Higher education 2 1 National R&D-investments 2 1 National investments in Infrastructure 2 1 Impact on the way to work with Regional 1 2 development policies Impact on social cohesion 2 1 Coordination between EU´s structural Unsatisfying Satisfying Good 1 Very good funds 2

Based on the three replies it seems appropriate to say that the Governors opinions are positive. One remark could be given to the less positive view concerning the coordination between the different funds. This is in accordance with earlier reported experiences from the local and regional level.

Institutional developments

From 1995 and onwards the agricultural policy in Sweden has successively undergone an evolution towards a rural area development policy. In a new national program for developing the rural areas (LBU) are – in accordance to pillar two in the EU program for rural development – greater emphasises put on the development of new and/or complementary activities to the agriculture. One good example of an early attempt to support a sustainable development in a rural area is given below.

Service centre in Övre Bygden: providing for the basic needs of the community

The area Övre Bygden is located in Kalix municipality in Norrbotten in NS. It includes seventeen small villages. The project started in 1997, with financial support from EU, aiming to maintain the vitality of the region. By developing new methods to satisfy the basic needs

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FINAL REPORT (ANNEX I) of its residents the areas attractiveness for living could be maintained or increased. A new service centre has been established close to a local shop. It has developed to a natural meeting place, offering IT-services and other contacts.

More information: Eliasson, Mikael +46 923 700 10

Recruiting across borders

A building that literally stands on the frontier between Sweden and Norway is built in Morkulien. In this building is among other activities is an employment agency located, staffed with one officer from Sweden and one from Norway. Their task is to meet the specific needs that employer and applicants from respective country have concerning the other countries legislation and labour market rules and regulations.

The joint employment agency is aiming at supporting an increased mobility among the labour force in both countries and thereby contributes to increased growth with less inflation in both countries.

More information: [email protected]

The formation of partnership and new ways for planning and implementation of new policies and programs have contributed substantially in Sweden to new and more efficient forms for co-operation. Some examples of new partnerships:

New and better partnerships

1. Partners from the Social economy has specifically been given a new platform within Objective 3 and they have been given opportunities to participate more active in both the planning of new EU-programs as well as the planning and preparation of new national growth-programs.

2. The forms for the participation of the social partners in different programming and implementation phases has been refined. Better understanding from both the authorities and the social partners have resulted in more efficient methods for planning and implementation.

3. Some of the new partners (The universities) participating in the planning for economic and social cohesion have been protesting against to sharp and to fast changes in policy. They argue that the anchoring of a policy is taking some time and must not be changed unless there are some very obvious reasons presented.

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6 CONCLUSIONS AND GUIDELINES

The complexity in the analysis and evaluation the impact on regional cohesion from all Community programs are overwhelming. With all necessary precautions, concerning above all the reliability of the datasets used in the present analysis, we can draw the following conclusions. They are presented in a way as to be seen as indicators of new guidelines for the implementation of coming community policies.

1. Simplification

The actors on regional and local level are still struggling with the complexities of the programs for the period 2000 – 2005. In preparing the coming programs could it be helpful to make ex ante testing of the transparency and the user-friendliness of the programs by using a task force of practitioners. This need of simplification is as relevant to the national level as it is to the Community level.

2. Flexibility and patience

The dilemma between flexibility and good structure and order is often demonstrated in the application of the different programs. One argument for greater flexibility is that the chances of mobilising the social partners and the social economy actors is greater if there could be more options for meeting new ideas and activities presented by a broadened partnership.

At the same time there are some actors and partners that have urged for greater patience in order to maintain the anchoring of programmes and arguing the structural changes need more time to be implemented. The Salomonian solution would be to let the partners concerned decide about the mix and balance between flexibility and long range programming.

3. Subsidiarity and coordination

The request for and need of better coordination could be handled by delegating even more decisions to the local and regional level. The need of coordination at higher level – national and EU -can be taken care of by refined pedagogical policy-documents.

4. Learning dialogue

The actors within different sectors and at different levels could be stimulated to in- crease their cooperation by participating in an interactive learning dialogue. By using an ongoing monitoring activity the actors at the field could be supported by the actors with overview and “good memory” about the objectives and good practices. Use less of ex post evaluations and use more of interactive monitoring.

5. The interplay between regional – labour market – educational policies

Based on the results from modern theories of endogenous growth it seems useful to put greater focus on the interplay between regional, labour market and educational policies (including life long learning) and how they are implemented.

6. The apparent need of more powerful instrument for regional cohesion

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The negative – and probably accelerating – population-development between different regions in Sweden puts focus on the need to identify and implement new effective measures that might counteract the rapid depopulation of large parts of Sweden. Within NMS and NS, a relatively large number of municipalities are belonging to the most vulnerable regions in Sweden.

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APPENDIX

Index of tables included in ANNEX II:

Diagram 1: GRP/Capita, Euro, current prices 1993 – 2000

Diagram 2: Population growth 1995 – 2000

Diagram 4.2: Total employment 1993 – 2001

Diagram 4.3.a: Employment/sector in NMS

Diagram 4.3.b: Employment/sector in NS

Diagram 4.4: Employment rates 1993 – 2001

Diagram 4.5: Total unemployment 1996 – 2002

Diagram 4.6: Gross Fixed Capital formation, Millions Euro

Diagram 4.7: Persons with post secondary education

Diagram 4.8: Persons with post-graduate education

Diagram 4.9: Newly started enterprises 1995-2000

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UNITED KINGDOM:

REGION: WEST MIDLANDS

ELABORATION:

Author: David Bradley

From: CURDS. CENTRE FOR URBAN AND REGIONAL DEVELOPMENT STUDIES. University of NEWCASTLE UPON TYNE

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF WEST MIDLANDS. UNITED KINGDOM

EXECUTIVE SUMMARY

INTRODUCTION

The West Midlands Region is a large, diverse region with a population of some 5.3 million people. The region includes relatively affluent areas as well as areas suffering from rural poverty and urban deprivation. The region’s urban areas contain pockets of extreme relative deprivation. Birmingham’s Inner City contains some of the most deprived areas within the UK.

The West Midlands Conurbation remains more specialised on nationally declining industrial sectors. With areas within the conurbation remaining heavily dependent on manufacturing employment.

The socio-economic conditions in the West Midlands improved during the 1990s, broadly reflecting improvements at the national level. Parts of the region are taking time to restructure through a period of continued decline in manufacturing employment.

PROGRESS TOWARDS COHESION

The performance of the West Midlands region has closely mirrored that of the UK economy. Maintaining its relative position close to the UK average should be viewed in the light of the region’s greater dependence on manufacturing sectors that have continued over the past decade to shed thousands of jobs. Thus, although no clear statistical evidence was found to suggest progress towards cohesion the region is arguably in a stronger position than it was a decade or so ago to begin to close gaps in economic performance.

EFFECT OF COMMUNITY POLICIES

Since the region’s relative performance remains largely unchanged, the combined effect of Community Policies in terms of cohesion would appear to have been broadly neutral.

Structural Funds

The scale of Structural Fund support of £100 -£150 million per annum (just over £1.4 billion over the period 1989-99) is modest when compared with a Gross Value Added for the West Midland region of some £63.5 billion per annum and compared with the size of the population targeted.

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The Structural Funds appear statistically to have been impotent against the forces of economic change facing the West Midlands, with neither an improvement to the region’s relative economic performance nor a narrowing of sub-regional differences in income wealth, and employment opportunity. However, due to the agglomeration of traditional manufacturing industries the effects of manufacturing decline have been felt unevenly and differences between different parts of the region could well have widened further without the intervention of Structural Fund support. Even if it is assumed that all Structural Fund investment in the region has been fully net additional, it is likely that other external factors have had a much more powerful influence on the development of the West Midlands economy.

CAP

CAP is likely to have added to rather than reduced intra regional disparities favouring arable farming and arable areas generally coinciding with those which are also benefiting from higher levels of economic growth.

Other Policies

The West Midlands region has a large broadly based economy not dissimilar to that of the UK as a whole, Competition Policy is thought likely to have had a broadly neutral effect on relative performance of the region as a whole. Relatively highly localised concentrations of manufacturing industries remain, particularly in parts of the West Midlands conurbation. Along with globalisation, Competition Policy can be expected to have contributed to a widening of intra regional differences by accelerating the pace of industrial change and thus the concentration of job loss in parts of the region.

Environmental and R&D policies are both thought to have had a modest and largely neutral net effect on cohesion.

Although the region has not benefited directly from Trans European Network investment. The region is on the edge of the ‘core region’ of Europe, but at the heart of the UK motorway network, the effects of TEN-T can be expected to have been broadly neutral.

COORDINATION BETWEEN POLICIES

Competition Policy, CAP and Structural Funds have been the dominant policies affecting the West Midlands. Structural Policy has arguably had to work against widening sub-regional differences which both CAP and Competition Policy can be expected to have contributed to.

Rural development in the English Regions remains fragmented with support for farmers being dealt with direct from the UK Government Department of Environment Food and Rural Affairs (Defra). Rural community development, development of market towns and farm support remain largely separated with

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FINAL REPORT (ANNEX I) relatively modest contribution from Defra in the development of coherent rural development strategy and even less involvement of others in farm support strategy.

The Objective 2 Programme management team have introduced ‘cross cutting themes’ of innovation, environmental sustainability, and equal opportunities which have arguably added the potential to add value to projects and improve the synergy of different community policies (innovation / R&D, environmental sustainability and equal opportunities.)

GOVERNANCE

As is the case throughout the English regions, structures of governance at the regional level remain weak, with truly strategic policy decisions taken in London. However, the creation of Development Agencies within the English regions has furthered a process of regionalisation. The formation of Advantage West Midlands, the Regional Development Agency, has added to the potential future strategic planning capacity of the region. A process which has arguably been stimulated by Structural Funding.

Structural Funds are administered largely through the Government Office West Midlands. CAP funds are administered at the level of English Regions through Defra.

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INDEX

1 METHODOLOGICAL ISSUES

2 CONTEXT AND BACKGROUND

3 KEY COMMUNITY POLICIES 3.1 STRUCTURAL FUNDS 3.2 CAP 3.3 ENVIRONMENT 3.4 INNOVATION AND RESEARCH AND DEVELOPMENT 3.5 STATE AIDS

4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO SOCIAL AND ECONOMIC COHESION IN THE REGION 4.1 ECONOMIC CONVERGENCE 4.2 CONVERGENCE BETWEEN DIFFERENT TERRITORIES AND SOCIAL GROUPS

5 COORDINATION BETWEEN THE COMMUNITY POLICIES

6 GOVERNANCE ISSUES

7 CONCLUSIONS

8 GUIDELINES FOR COMMUNITY ACTION

APPENDIX

COHESION INDICATORS POLICY EXPENDITURES ENVIRONMENTAL INDICATORS REPORTS OBTAINED INDEX OF TABLES INCLUDED IN ANNEX II

Index of tables

Diagram 1: GDP Per Head UK Index

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1 METHODOLOGICAL ISSUES

Data on a wide range of economic, social and environmental indicators is available at the regional scale. Data is more limited at the level of the Objective 2 and transition areas which form a complex overlay over parts of the region.

The definition of the Objective 2 area is fairly complex given that only parts of a number of local authority areas are included within its geographical boundary. For some socio-economic indicators this best fit takes into account the districts / boroughs within the former West Midlands County area only, i.e. Birmingham, Coventry, Dudley, Sandwell, Solihull, Walsall and Wolverhampton. Furthermore, the areas eligible for Structural Fund support have varied between programme periods making any long term analysis of changes within these assisted areas virtually impossible.

The research has been necessarily broad brush relying on the advice and guidance of contacts within the region. It must be stressed that the research cannot hope to be either definitive or comprehensive. The budget for this case study research did not allow for a comprehensive analysis of regional economic performance, community policies, national spending, governance or co-ordination issues.

There is considerable doubt whether the allocation of Structural Funds has significantly improved either the targeting or co-ordination of funds relating to economic development. It would however be a task well beyond the scope of this study to try to tease out the extent to which the scale and direction of funding has been affected by the Structural Funds.

The analysis and subsequent conclusions are based on analysis of key economic and social indicators, analysis of expenditure data and discussions with 9 key actors in the region with responsibility for managing relevant national and /or Community Programmes as well as consultation with several leading academics with relevant research experience.

Obtaining comprehensive data on European Community expenditure in the region since 1989 is proving to be far more difficult than anticipated. It should be possible to obtain details of directly matched funding from regional and national sources. It would be a major task to estimate other regional and national spend on related projects and programmes which has not been in receipt of European funds either within the assisted areas or within the region as a whole.

2 CONTEXT AND BACKGROUND

The West Midlands is one of the largest and most diverse regions of the UK covering some thirteen thousand square kilometres and with some 5.3 million people (9% of UK total population). Birmingham, the second largest city in the UK, is the region’s main administrative centre, and is also a fast growing commercial locality.

The region includes relatively affluent areas as well as areas suffering from rural poverty and urban deprivation. The region’s urban areas contain pockets of extreme relative deprivation. Birmingham’s Inner City contains some of the most deprived areas within the UK.

Over 450,000 people in the region (8.5%) are from a black or ethnic minority community - the highest proportion in the UK outside of London.

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3 MAIN COMMUNITY POLICIES

3.1 STRUCTURAL FUNDS

Since 1989 the West Midlands has been a recipient of substantial amounts of Structural Funds support (some 1.4 billion ECUs up until the end of 1999. The Region has been a designated Assisted Area since 1994.

Relevant programmes include: Objective 2 1994-1996 (370 meuro, 1994 prices) and 1997-1999 (450 meuro, 1997 prices) Objective 5b 1994-1999 (41 meuro, 1994 prices). Regional Community Initiatives (LEADER II; RECHAR II; RETEX II; KONVER II; URBAN; and the SME Initiative) Objectives 3 (1997-1999) & 4 (1998-1999) (National Programmes) over 35 meuro) Objective 2 2000-2006 and 2000-2006 Objective 2 Transition Programme

The support map has been relatively complex, reflecting the considerable degree of variability between juxtaposed prosperous and less prosperous parts of the region.

The size of the region is such that Structural Fund support represents only a small percentage of total public spend in the region.

The region also benefited from smaller amounts of Structural Funds from KONVER. LEADER 2, RETEX 2 and SME.

3.2 CAP

The West Midland region is marginally more dependant on Agricultural output than the UK as a whole. The region has throughout the period of Structural Fund assistance received considerably more CAP than Structural Fund support.

The region currently receives some £150 million a year in CAP Pillar I payments compared with under £100 from Structural Funds. The majority of Structural Fund support has been targeted on urban areas and in particular the west Midlands conurbation. In rural areas CAP has been the overwhelmingly dominant source of EU funds.

3.3 ENVIRONMENT

It was suggested that partly a result of pressure from DG Regio an Environmental cross cutting theme had been introduced.

Environmental Policies were regarded by interviewees as having had a ‘broadly neutral’ effect - adding costs to some businesses but creating market opportunities for metal working and engineering industries in pollution control equipment.

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3.4 INNOVATION AND RESEARCH AND DEVELOPMENT

‘Innovation’ is one of four cross cutting theme within the 2000-206 Programmes and there are measures included to support R&D projects. Competition for R&D related measures is understood to have been les intense than for some measures included within the programme.

3.5 STATE AIDS

State Aid regulations, combined with UK Government Interpretations (DTI) combined with regional level interpretation within the West Midlands, had led to increasing number of projects being scaled down, delayed or withdrawn. The constraint of a 15% intervention rate was also considered a problem.

4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO ECONOMIC AND SOCIAL COHESION IN THE REGION

4.1 ECONOMIC CONVERGENCE

The socio-economic conditions in the West Midlands improved during the 1990s, broadly reflecting improvements at the national level. Parts of the region are taking time to restructure through a period of continued decline in manufacturing employment.

GDP Per Head UK Index

104 102 100 98 UK 96 England 94 West Mids 92 90 88 86 1989 1990 1991 1992 1993 1994 1995 1996 1997

Long term unemployment in the Objective 2 area remains stubbornly higher than that of the West Midlands as a whole.

The new Objective 2 area in the West Midlands, (which includes rural areas assisted under the previous Objective 5B Programme), covers just under half the region’s population (2.43 million. A further 1.108m of the West Midlands population is eligible for transitional ERDF support from within the Objective 2 programme. The Objective 2 area comprises 272 of the region’s 825 wards and includes urban/industrial and rural areas.

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Manufacturing remains important to the regional economy despite long term decline, with a larger share of employment in manufacturing in the West Midlands than in any other UK region. The automotive industry in particular remains significant to the regional economy.

The Objective 2 area has not shared to the same extent as the rest of the region in the overall expansion of employment in both the region and the wider economy. Between 1991 and 1997 the number of jobs the West Midlands region increased by 3.6% from 2.0 million to 2.1 million. In the Objective 2 area however, the total rose from 1.067 to 1.076 million, or only 0.9%.

Manufacturing employment fell sharply (-7%) in the Objective 2 area. The fall was far less severe in the West Midlands as a whole (-1%) and nationally (-2%). Service sector employment within the Objective 2 area on the other hand grew sluggishly by some 6.2%. Service sector employment in the West Midlands area grew at 9.8% and nationally by 9.3%.

On most accepted measures of educational and vocational attainment the West Midlands is one of the poorest performing regions in the UK. Although regional performance against the National Learning Targets has improved in recent years, the rate of improvement has not been sufficient to narrow significantly the margin by which the West Midlands trails the national average. The Region continues to lag considerably behind the rest of the country in respect of both young people’s and adult’s attainment, with both groups being the least well qualified in the country, with attainment levels considerably below the national average. Objective 2 areas in particular are characterised by low levels of skills, and poor performance against National Learning Targets.

Significant difficulties remain as the Objective 2 area continues to experience the decline of its manufacturing base:

- Continued population decline in the Objective 2 area 1994-2001 compared with an increase in the remainder of the West Midlands and Great Britain.

- Fall in the stock of VAT registered businesses 1994 to 2002 in the Objective 2 area compared with an increase in the remainder of the West Midlands and Great Britain.

- Slower rate of decline in unemployment numbers than in West Midlands and Great Britain.

- Marginally slower growth in GDP than in West Midlands and Great Britain – West Midlands region had 92% of the UK GDP per head index in 1994 which fell slightly to 91% in 1998.

The areas of the West Midlands eligible for Structural Fund support have varied between subsequent programme periods, adding to the complexity of attempting to tease out the effects of the Structural Funds.

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4.2 CONVERGENCE BETWEEN DIFFERENT TERRITORIES AND SOCIAL GROUPS

4.2.1 Structural Funds

It is very difficult to determine the extent to which contrasts between the Structural Fund assisted and those not in receipt of Structural Fund assistance and between relatively prosperous and less prosperous areas might have been greater without Structural Fund support.

EU Structural Funds have been working against a strong tide of:

Investor preference for green field development (most notably to the south and west of the West Midlands conurbation) Strong counter urbanisation trend – out-migration of middle class, employed residents from less prosperous inner city / (former) industrial areas pull of London contributing to a general shift to the south west of the region Concentrated industrial rationalisation and closure within targeted areas.

Marked changes in the structure of the economy have occurred with massive job loss from manufacturing and even greater jobs gains in the service sector.

Strong localisation of traditional industries led to concentration of job loss and pockets of relatively high unemployment. A paradox of thousands of jobs apparently being created in areas of high job loss and yet no relative improvement in unemployment differences can be explained by a combination of factors:

inner city residents moving out to non assisted areas once gaining employment residents from non-assisted areas gaining some of the new jobs created further job losses occurring in those areas as de-industrialisation continues.

Two Urban Development Corporations - Black Country and Heartlands - received substantial national government funding during the 1990s. Several Black Country UDC projects received Structural Fund support boosting the overall scale of expenditure. UDCs were required by the UK Government to estimate the amount of EU assistance they would receive. It is uncertain what effect success in gaining EU funds had on overall levels of UK Government funding for the UDCs.

One area to have received a particular concentration of EU support has been the Broad Street area of central Birmingham. The scale of EU support in this area has been such that the scale of initial pump priming investment and the pace of infrastructure improvements can be assumed to have increased. Support for the development of major cultural facilities, landscaping, pedestrianisation may have greatly increased the pace of change in the Broad Street area and indeed may have helped in fuelling developer confidence to expand the city centre in other directions for example into St Pauls. Birmingham’s dominance as a supra- regional centre, housing specialist financial and business services activities serving the West Midlands region, and in many cases beyond, grew during the 1990s . This increased dominance and concentration has arguably been at the expense of smaller sub-regional centres such as Wolverhampton and Walsall and may have added to levels of congestion and car-generated pollution.

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4.2.2 CAP

The 1992 CAP reforms stimulated thousands of acres of grazing land to be ploughed in order to access higher levels of funding through Arable Area Payments. Environmental consequences included accelerated hedgerow loss, increased siltation and reduced river salmon stocks, and may have contributed to increased flooding levels.

Pillar I payments, by targeting farmers rather than rural communities, have widened differences in wealth both within and between areas. They have arguably however been sufficiently high to support small hill farmers to remain in situ and farming the land around their home, thus keeping the social fabric of upland areas together. Had subsidies been removed, New Zealand style ranch farming could have resulted. Elsewhere, Arable Area Payments have reduced hedgerows, increased farm size and led to a capital intensification of production.

CAP, together with UK policy towards agriculture and the Town and Country Planning Act, have served to separate agriculture as a special case and treat rural land as a food generating resource. Pillar II funds have not been closely aligned with other elements of rural strategy.

CAP is likely to have added to rather than reduced intra regional disparities favouring arable farming in areas which are also benefiting from higher levels of economic growth.

4.2.3 Competition Policy

The West Midlands has a large broadly based economy not dissimilar to that of the UK as a whole Competition Policy is thought likely to have had a broadly neutral effect on relative performance of the region as a whole. However along with globalisation, Competition Policy can be expected to have contributed a widening of intra regional differences by accelerating the pace of industrial change and thus the concentration of job loss in parts of the region.

The effects of Competition Policy upon the region can be expected to have been uneven. Growth in the relative importance and hence pull of the ‘South East Region’ market within can be expected to have contributed to a relative shift of activity towards the South East corner of the region. The Single European Market by contributing to increased levels of trade between the UK and EU can also be expected to have contributed to the pull of activity towards the core regions, and to locations which can readily access the EU market. The EU Drive Time Directive can be expected to continue the pull of investment towards the South East corner of the region by arguably placing an increased importance of truck travel times to England’s east coast ports (4.5 hour drive time).

4.2.4 Research & Development

Businesses in the region have a lower propensity to invest in R&D than the UK average. The West Midlands region accounts for around 8.5% of UK GDP but over the period 1996-98 inclusive, it contributed between 6.5% and 7% of UK BERD (Business Enterprise Research & Development).

The region, mainly though its Universities has gained a reasonable share of funds through the European R&D Framework Programmes.

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Interestingly the most research active Universities in the region (Birmingham and Warwick) have chosen not to aggressively seek to access funds through the Objective 2 Programme. This policy can be expected to have both reinforced strengths and help to maintain relative levels of R&D and thus be expected to have had a broadly neutral effect on the region.

4.2.5 Environmental Policies

Environmental policies are both thought to have had a modest and largely neutral net effect on cohesion at the regional level. No one EU environmental policy is thought to have a significant determining impact on the West Midlands economy. By adding minor financial costs at the same time as opportunities policies might marginally have accelerated the rate of restructuring and associated job loss of some traditional manufacturing businesses and assisted the formation and expansion of other activities. Due to the localisation of such activities within the Structural Fund assisted part of the region there could be expected to have been a slight but not measurable contribution to divergence within the region.

4.2.6 Trans European Networks

The region has benefited from significant UK Government (and to a much lesser extent ERDF support) over the past forty years which have placed the West Midlands at the heart of the UK motorway / strategic road network.

Although the region has not benefited directly from Trans European Network investment. The region is on the edge of the ‘core region’ of Europe, but at the heart of the UK motorway network, the effects of TEN-T can be expected to have been broadly neutral.

5 COORDINATION BETWEEN THE COMMUNITY POLICIES

The region is a large complex region with different needs and different opportunities and threats and a relatively large number of administrative areas. In order to reach agreement across such a broad and diverse set of needs and differing local priorities the Regional Economic Strategy is necessarily broad and it is difficult to identify a clear ‘development model’.

ERDF and national funds have achieved significant levels of redevelopment of derelict former industrial land. Despite thousands of jobs being housed in new developments within the Objective 2 area intra regional differences remain undiminished.

The evaluation of the 1997-99 Objective 2 Programme concluded that business development activities were less focussed and concentrated than they should have been, creating the potential for reduced impact.

The West Midlands is understood however to have developed an innovative approach to maximising complimentarity between Objective 2 and Objective 3 with one of the Regional Economic Strategy priorities is effectively delivered through Objective 3.

DEFRA (Department of Farming and Rural Affairs) although represented in the West Midlands regional office and theoretically part of ‘joined up’ government in the region

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Structural Funds have widened the spectrum of funding which suits better some projects. Their presence has also led to some innovative actions, and raised capacity to operate a programmatic approach.

The region is forecast to experience increasing levels of congestion, even with significant new investment. At the same time the contribution of transport to air pollution and climate change is increasing in absolute and (because of reduced contributions from industry) in relative terms. Negotiations with DG Regio to try to include a significant component in the current Objective 2 Programme to support public transport investment failed.

Following the adoption of the SPD, regional development polices have been updated, with revisions to the West Midlands RPG and RES. Resulting weakness in policy links could become a constriant. The SPD has not been revised to improve consistency with the latest RES and RPG, but the mid-term review of the programme should allow opportunity for the creation of improved synergy between regional policy and the SPD objectives. A key lesson from previous programming periods is that regional policy strategies should be in place before an SPD is developed.

6 GOVERNANCE ISSUES

In common with all English Regions structures of governance remain weak. Although the region has a regional development agency (Advantage West Midlands) and a regional office of national Government in the region, truly strategic policy making continues to be made in London.

The formation of ‘Advantage West Midlands’ has added to the future strategic planning capacity within the region, and over time its influence could be expected to grow. The Structural Funds Programme for 2000-2006 has been designed to support Advantage West Midland’s Regional Economic Strategy.

The creation of Development Agencies within English Regions furthers a process of regionalisation, which has arguably been facilitated if not stimulated by Structural Funding.

The introduction of specialists to manage the ‘cross cutting’ themes has strengthened the level of technical expertise within the team managing the Structural Funds. It remains unclear whether improvements in project quality have outweighed the administrative costs to partners in bidding for funds.

Administration of this large region is fragmented. There are 38 local authorities with vast variations in recourses and administrative capacity, encompassing the geographically large rural counties of Herefordshire, Worcestershire, Shropshire, Staffordshire and Warwickshire and the seven metropolitan boroughs of Birmingham, Coventry, Wolverhampton, Dudley, Sandwell, Solihull and Walsall. Together the metropolitan boroughs form the second largest conurbation in the United Kingdom. The west of the region has large rural areas, and there are also extensive rural areas around the north of Staffordshire conurbation, including the Peak District National Park.

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Structural Funding was considered to have encouraged greater partnership and co- ordination at the local level.

The introduction of cross cutting themes has contributed to a step change in the complexity of the application process. Structural Fund bidding expertise is relatively weakly developed within the West Midlands and is unevenly developed. Some areas have teams with a range of expertise, others have a lesser capability. The pattern of expertise could have a significant influence on the eventual distribution of Structural Funds across the West Midlands. Birmingham City Council, the largest and most administratively resourced local authority in England managed to secure some £374 of EU Structural funding (mainly ERDF) up to the end of 2002 and its partners secure some £125 million for projects in the city.

The introduction of the requirement for all applications to be innovative appears to have been a particular barrier for community projects.

It was suggested that fear of claw back had reduced interest from the University sector in securing funds through the 2000-2006 programme.

Advantage West Midlands has delivered training to organisations across the region in relation to the programme requirements and bidding.

Funding through the England Rural Development Programme is available across all rural areas in the region. It has been found that applications coming forward were mainly from the previous Objective 5b area, suggesting that the programme had stimulated local bidding capacity. It has been considered necessary to try to facilitate applications from other parts of the region.

The creation of Local Area Groups through Leader was suggested to have been effective in identifying projects which targeted the needs of local communities and groups.

7 CONCLUSIONS

A desire to increase partnership and add value to projects led to a complex and ambitious Objective 2 programme for 2000-2006 with the introduction of cross cutting themes. The changes potentially appear to been a step too great for a region such as the West Midlands, where Structural Funds are of relatively marginal significance.

Institutional fragmentation within the West Midlands has made it arguably more difficult to communicate programme requirements to applicants, and more difficult for partners to ensure that the Government Office West Midlands team managing the programme adopts a pragmatic approach to project appraisal.

Significant disparities remain both within and between areas. Structural Funds can be expected to have helped to stem a widening of disparities

In financial terms CAP has been the dominant Community Policy in the region and can be expected to have widened disparities within the West Midlands..

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8 GUIDELINES FOR COMMUNITY ACTION

Agree state aid compliance at strategy level. Fund technical support to assist less experienced project promoters through the process of applying for funds and then monitoring projects. Insist that regional administrations reduce complexity of the Structural Funds application process. Retain and increase strength of partnerships. Include capacity building early in the programme in order to generate and attract suitable projects from a range of applicants. Assess likely impact of proposed projects if necessary in the case of large projects using technical support, and then fund projects on the basis of directly linked outputs only. For example in the case of a factory unit the output should be simply the amount of floorspace created not the number of jobs housed – if there is not sound evidence of demand and market failure to supply the development should not be supported. Seek CAP reforms that will support communities as well as farmers, but which are administered in a way that will not lead to significant leakage into administrative costs. Encourage bottom up capacity building but not at the cost of project quality or significantly reduced administrative efficiency. Ensure that measures are in place to avoid the exclusion of smaller projects and less experienced project promoters. Encourage additionality, innovation and risk taking by maintaining high intervention rates.

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APPENDIX

COHESION INDICATORS

Indicators obtained for West Midlands are listed in the table below - see attached files for detail.

Demographic Migration (inter-regional movements as % of Net inter-regional movements, 1991-2001 working age population) (no data for 2000) Social class of working age population 1993-2000 social class I-V 2001, 2002 NS-SEC classification Population of ethnic minority groups as % of total 1993-2001 regional population Economic Regional GDP per head 1993-1998 at current basic prices (£ per head & per head index, UK = 100) Average gross weekly earnings 1990-2000, by gender R&D employment as % of the regional workforce No data Poverty & social exclusion Unemployment 1992-2002 Benefit claimants (incapacity or disablement) 1993/94-1999/00 Education Educational attainment (degree/ GCSE/ no 1990-2002 (no data for 1997 & 1999) qualification) Environment Household recycling rates Available for 1996/97-2000/01 Greenhouse gas emissions No data Emissions of air pollutants (carbon monoxide; No data methane (under GHG); nitrous oxides; non- methane volatile organic compounds) Agriculture Agricultural legal units as a % of total legal units 2001 only % of GDP derived from agriculture 1990-1998 Agricultural holdings by area of crops & grass, 2001 only and by land use.

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POLICY EXPENDITURES

See Excel file

ENVIRONMENTAL INDICATORS

- air quality – DETR operate ten automatic air quality monitoring stations in the region. Measurements show that the highest levels of pollution occur in urban areas, for example Birmingham Centre experienced 345 days of low level, 3 days of moderate level and 1 day of high level sulphur dioxide exceedances in 1998

- water quality – some 91% of regions rivers are classed as good/fair with 74% of the regions canals similarly graded. The analysis here would be strengthened by a separate assessment of water quality for the Objective 2 area coupled with national comparisons

- nature and bio diversity – around 55,700 ha of agricultural land in the West Midlands is designated as being in environmentally sensitive areas. The region contains 443 sites of special scientific interest – 13 of which have been awarded international designations

- landscape – five of England’s 37 Areas of Outstanding Natural Beauty (AONBs) are located within or partly within the region

- urban environment – Traffic levels on main roads and motorways in the metropolitan area grew by 20% to 7 billion vehicle km between 1985 and 1995

- noise – in the absence of regional noise data the SPD have used ‘tranquillity’ as a proxy measure, data (not presented in the needs analysis) shows that between the 1960s and 1990s large areas of land have lost their tranquil status

- waste management – in 1994/95 households, commerce and industry in the region generated some 16.5 million tonnes of waste. (3,121 kg per person per annum) The proportion of household waste being recycled across the region is low - the national average recycling rate for household waste in county councils was 5.3% and for metropolitan councils 4.6% - the highest percentage of household waste recycled in 1996/97 was in Warwickshire at 2.6%.

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REPORTS OBTAINED

- Ex Ante Evaluation of the West Midlands’ Objective 2 Programme 2000-2006

- The Marches Objective 5b Programming Document 1994-99: Final Progress Report

- URBAN Programme: Final Evaluation

- URBAN Programme: Final Closure Report – Birmingham (Sparkbrook)

- URBAN Programme: Final Closure Report (Hillfields)

- The West Midlands Objective 2 Programming Document 1997-99: Final Progress Report

- West Midlands Objective 2 Single Programming Document 2000-2006

- The West Midlands RECHAR II Programming Document 1994-99: Final Progress Report

- Thematic Evaluation of the impact of the Structural Funds on the Environment – Case Study 17 UK – Marches - Ecotec

- Lovelace, D. (1999) How Green is the Grass ECOS, March 1999

- The State of Herefordshire Report (2001) The Herefordshire Partnership

- Birmingham’s Renaissance – How European Funding has revitalised the City – Birmingham City Council (2003)

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Index of tables included in ANNEX II

Excel File Name Table/Chart Title agric-gdp.xls A regional comparison of the contribution of agriculture, hunting, forestry and fishing to GDP (1990-1998) [West Midlands/Scotland/Northern Ireland/UK] [Chart] agric-gdp.xls % of gross domestic product (GDP) derived from agriculture [West Midlands/Scotland/Northern Ireland/UK] [Table] agricholdings-land- Agricultural holdings: by area of crops and grass, and by use.xls land use, June 2001 [all UK regions] [Table] benefit-recipients.xls Households in receipt of benefit: by type of benefit [West Midlands/Scotland/UK] [Table] earnings.xls Average gross weekly earnings: by gender [West Midlands/Scotland/Northern Ireland/UK 1999- 2000; Highlands & Islands region 1999 only] [Table] ethnic.xls Regional distribution (%) of the minority ethnic population, April 2001 [all UK regions] [Table] ethnic.xls Distribution (%) of ethnic groups within regions, April 2001 [West Midlands/Scotland/Northern Ireland/UK] [Table] ethnic.xls Ethnic groups 2001 [Highlands & Islands councils (sub-regional) & Scotland] [Table] GDP.xls Gross domestic product (GDP) at current basic prices 1993-1998 (£ per head and per head index) [West Midlands/Scotland/Highlands & Islands/Northern Ireland/UK] [Table] migration.xls Regional comparison of net population change from internal migration (1990-2001; no data for 2000) [West Midlands/Scotland/Northern Ireland] [Chart]

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FINAL REPORT (ANNEX I) migration.xls Inter-regional movements 1991-2001 [no data for 2000] [West Midlands/Scotland/Northern Ireland] [Table] migration.xls Migration – Highlands & Islands sub-regional level, 2001 [Table] no-of-agric-units.xls Agricultural legal units as a % of total legal units, 2001 [West Midlands/Scotland/Northern Ireland/UK] [Table] qualifications.xls Educational qualifications of the workforce 1990-2002 [no data for 1997] [West Midlands/Scotland/Northern Ireland] [Table] qualifications.xls Qualifications, Highlands & Islands council area (sub- regional), 2001 [Table] social-class.xls Social class of economically active population (%) 1993- 2000 [West Midlands/Scotland/Northern Ireland/UK] [Table] social-class.xls Socio-economic classification, 2001 [Highland & Island council areas (sub-regional) and Scotland] [Table] social-class.xls Socio-economic classification by region, 2001 [West Midlands/Northern Ireland] [Table] social-class.xls Socio-economic classification as a % of workforce 2001 [West Midlands/Scotland/Northern Ireland] [Table] unemployment_rates. Unemployment rates 1992-2002 (% at Spring each year) xls [all UK regions] [Table] NI structural fund Northern Ireland Structural Fund spend spend.xls [Table] NIagric.xls Direct payments and levies included in the Aggregate Agricultural Account 1981-2002 [Table] NIagricgrants.xls Capital grants and other direct payments not included in the Aggregate Agricultural Account 1981-2002 [Table]

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UNITED KINGDOM:

REGION: HIGHLANDS & ISLANDS

ELABORATION:

Author: David Bradley

From: CURDS. CENTRE FOR URBAN AND REGIONAL DEVELOPMENT STUDIES. University of NEWCASTLE UPON TYNE

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF HIGHLANDS & ISLANDS. UNITED KINGDOM

EXECUTIVE SUMMARY

INTRODUCTION

The Highlands and Islands region of Scotland is the most northerly part of the UK and has one of the lowest population densities in Europe.

The region has suffered from long-term problems of relatively high unemployment and low incomes coupled with net out-migration. Parts of the region have experienced almost continual population decline for two centuries. At the regional level this decline appears to have been reversed.

Over the past decade or so the population in the Highlands & Islands as a whole has increased slightly and levels of unemployment have fallen.

PROGRESS TOWARDS COHESION

Estimated levels of GDP per capita relative to the EU average have steadily, fallen since the region gained Objective 1 status in 1994. Levels of unemployment have fallen broadly in line with falls across the rest of the UK

Within the Highlands and Islands the economy of different areas has grown at different rates. Although some parts of the region have grown strongly, others, notably the more remote western parts of the region (that have not benefited from significant oil revenues) have achieved relatively modest growth.

EFFECT OF COMMUNITY POLICIES

Structural Funds

Although EU Structural funds represent only a small proportion of the total public spend within the region it was widely held by regional respondents that Structural Funds had made an important difference, not least in terms of bringing key infrastructure investments forward.

More importantly the Structural Funds may have maintained the operation of an integrated ‘regional policy’ within the Highlands & Islands. Without Structural

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Funding it is uncertain whether the UK government would have fully filled the gap with increased levels of economic development related spending.

It was suggested that the requirement for a programmatic approach had improved the strategic focus and co-ordination of regional policy, and also improved monitoring and evaluation. It was suggested that the regional priorities (to develop the regional economy in order to retain populations and communities) were well established prior to EU Structural Funds, and that Structural Funds had been used to focus on these regional priorities.

Aquaculture and Fisheries policies

The waters off the west coast of Scotland have been over-fished with steadily reducing stock levels over many decades. It appears to be accepted by policy officers in the region that a co-ordinated European policy to reduce catches is necessary. Concern however was expressed in the region that other countries were using EU funds to modernise vessels, and that if there is a recovery in stock levels the region would be poorly placed to take advantage.

Agricultural policy

CAP provides a valuable boost to the regional economy (around 100 Meuros per annum). Without CAP it is uncertain whether the number of farms and crofts that remain would be as high. Farming methods have potentially become more extensive, particularly in the West of the region, with the resultant loss of many crofts. In this sense, CAP might have provided a valuable break on the long-term persistent trend of depopulation from the Western fringes of the region, and thus played a central role in achieving the primary regional policy objective. In arable areas, for example on the Black Isle, CAP, through guaranteeing incomes, this has allowed farmers to invest in capital equipment and intensify production. A result of intensification has been the enlargement of field sizes in some parts of the region by removing hedgerows. Such intensification may potentially have accelerated the rate of reduction in agricultural labour requirements.

CAP subsidies, particularly to the West of the region, have arguably also provided a break on rural adaptation and development. By maintaining historical community ties to agriculture this may have reduced levels of both in and out migration and constrained the ability of remote areas to adapt to new market opportunities. Had subsidy levels not been so high more crofters could be expected to have sold up, and more incomers bought properties and brought with them wealth, and in some cases viable businesses. Whether more in-comers would have bought homes to live in or as holiday homes is an issue for speculation.

It appears that CAP may have worked against economic cohesion widening intra regional differences in incomes and also providing a break to rural adaptation in less prosperous and less fertile areas, particularly crofting areas. It would, however, appear to have had a potentially significant effect in supporting social cohesion - retaining crofters as the ‘cement’ of society, helping to retain crofters and their families in situ and helping to maintain Gaelic language and culture.

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Competition Policy

The effects of Competition Policy have been uneven. As a relatively isolated region on the northwest fringe of the European Union, there are in many cases greater costs involved in distributing goods and services across Europe. Even though the ‘lions share’ of EU Structural Funds within the region have been spent over the past 15 years on transport and telecommunications infrastructure, the region has become arguably more peripheral.

Research & Development

The region lacks a major research based university and large R&D intensive corporations, and hence has secured only a modest share of funds through the European R&D Framework Programmes. This policy can both be expected to have encouraged centripetal tendencies to agglomerate economic activity in the ‘core’, most accessible regions and thus further disadvantage Highlands & Islands.

Trans European Networks

The region has invested significantly in new transport infrastructure through use of Structural Funds, funding has however not come through TEN-T. The creation of major new road and rail networks tying regions together, and in particular improving access to and from the core regions, serves to reduce in relative terms the accessibility of the Highlands and Islands can expected to have encouraged centripetal tendencies to agglomerate economic activity in the ‘core’.

Environmental Policies

It was generally felt that EU environmental regulations had not had a huge effect on the Highlands and Islands and that the region had been exposed to far greater ‘external shocks’. Indeed some might have benefited the region. The ‘Water’ directive is likely to have increased the rate of investment in cleaning up sewerage emissions to the benefit of the region.

The renewables obligation, imposed by the UK government creates an escalator for the amount for electricity which suppliers must buy from renewable generators, rising to 10% by 2010 has led to a step change in the potential for the industry to develop. Renewable energy generation presents an opportunity for the Highlands and Islands with highly favourable conditions for wind, wave and hydro-electric power generation. Communities living in the remote western fringes of the mainland and for the Islands off the west coast with local levels of GDP per capita below the EU average could be expected to be well placed in benefiting from anticipated investment leading to jobs in both construction and maintenance.

EU R&D support for renewable energy generation has helped to raise the potential for offshore power generation. Monitoring of the contribution of different energy sources to overall energy requirements across Member States has exposed

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FINAL REPORT (ANNEX I) the UK’s relatively poor performance, and could have helped to encourage the UK government to push for higher levels of renewable energy generation.

COORDINATION BETWEEN POLICIES

Structural Funds through both main programmes and Community Initiatives are carefully co-ordinated.

R&D actions are woven into a number of the programmes receiving Structural Fund support.

Environmental issues are regarded within the region as being at the heart of regional development policies in the region. The rugged beauty of the landscapes and cleanness of air and water are now recognised as important economic development assets.

Where co-ordination appears to have been weakest seems to be in the area of rural development, where support for farmers and fisherman comes from the Scottish Department for Agriculture (SERAD). Owing to the rural nature of most of the region and the dependence of many communities on primary industries, this ‘administrative separation’ was considered by some of those interviewed in the region to have potentially constrained the development of coherent locally specific rural development policies.

GOVERNANCE

Structures of governance for the region relating to European policies are split mainly between the Highlands and Islands and Scottish level.

Most of the Structural Fund allocation to the region has since 1994 been administered in the region by the Highlands and Islands Partnership. CAP, EAGGF and FIFG funding however has continued to be managed by the Scottish Department of Agriculture (SERAD) in Edinburgh.

There has been an attempt within the major Structural Fund programmes to decentralise some activity and create ‘bottom up’, ‘local level’ infrastructures for the design and delivery of projects and strategies.

The institutional capacity of local partnerships to develop, bid for and draw down EU Structural Funds appears to have varied with different areas achieving different levels of success in securing funds.

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INDEX

1 METHODOLOGICAL ISSUES

2 CONTEXT AND BACKGROUND

3 KEY COMMUNITY POLICIES

3.1 STRUCTURAL FUNDS 3.2 CAP 3.3 ENVIRONMENT 3.4 STATE AIDS

4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO SOCIAL AND ECONOMIC COHESION 4.1 STRUCTURAL FUNDS 4.2 FISHERIES POLICIES 4.3 AGRICULTURAL POLICY 4.4 COMPETITION POLICY 4.5 ENVIRONMENTAL POLICIES

5 COORDINATION BETWEEN THE COMMUNITY POLICIES

6 GOVERNANCE ISSUES 6.1 COMMUNITY PROGRAMME MANAGEMENT 6.2 COORDINATION OF STRUCTURAL FUNDS 6.3 DECENTRALISATION

7 CONCLUSIONS

8 GUIDELINES FOR COMMUNITY ACTION

APPENDIX

COHESION INDICATORS POLICY EXPENDITURES ENVIRONMENTAL INDICATORS REPORTS OBTAINED INDEX OF TABLES INCLUDED IN ANNEX II

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1 METHODOLOGICAL ISSUES

The task of obtaining both expenditure data and data on economic, social and environmental indicators was found to be difficult with much data only readily available at the level of Scotland.

The research has been necessarily broad brush relying on the advice and guidance of contacts within the region. It must be stressed that the research cannot hope to be either definitive or comprehensive. The budget for this case study research did not allow for a comprehensive analysis of regional economic performance, community policies, national spending, governance or co-ordination issues.

There is considerable doubt whether the allocation of Structural Funds has significantly improved the targeting of funds relating to economic development. It would however be a task well beyond the scope of this study to try to tease out the extent to which the scale and direction of funding has been affected by the Structural Funds.

The analysis and subsequent conclusions are based on analysis of key economic and social indicators, analysis of expenditure data and discussions with 8 key actors in the region with responsibility for managing relevant national and /or Community Programmes as well as consultation with several leading academics with relevant research experience.

Particular difficulties were experienced in identifying data for the Highlands and Islands region. Sub-national data which is available is largely at council level. Only for a small minority of indicators had the analysis been done to aggregate these to the Highlands and Islands regional level. However, a further complication is that the boundaries of the Highlands and Islands NUTS 2 area are not strictly comparable with those of its constituent local authorities. Historical data for the region was especially problematic to locate, despite the invaluable assistance of both Highlands and Islands Enterprise (HIE) and the Highlands and Islands Partnership Programme (HIPP).

2 CONTEXT AND BACKGROUND

The Highlands and Islands region of Scotland is the most northerly part of the UK. The area covers over half of Scotland (larger than Belgium) and yet has a population of just 372,000. With just 9.2 people per square kilometre the region has one of the lowest population densities of any region in Europe.

The largest settlement is Inverness with some 40,000 people. Some 61% of the population lives in rural areas or settlements with populations of fewer than 5,000.

The Highlands & Islands suffered from long-term problems of relatively high unemployment and low incomes coupled with net out-migration. Over the past decade or so the population in the Highlands & Islands as a whole has increased slightly, and levels of unemployment have fallen.

Some of the more remote parts of the region (Argyll and the Islands, Western Islands and Caithness and Sutherland) have continued to experience a net population decline. With the exception of Argyll and the Islands where the loss of a US Naval base led to the loss of 2,750 from the area, it is natural change rather than net-out migration that has led to a continued decline in population of these areas.

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As a result of the mountainous terrain the overwhelming majority of land in the region is classed by the European Union as less favoured for agriculture.

Two thirds of the economy is within the service sector, with public administration and tourism being the two main components. Financial and professional business services are however relatively under-developed in the region.

Primary industries remain of continuing importance, with some of the more remote rural areas and islands being particularly dependant on agriculture and fisheries.

Levels of self employment are relatively high reflecting the relative importance of farming and tourism.

Important industries such as tourism are particularly exposed to external factors.

The oil fabrication industry centred on building the ‘jackets’ for oil platforms has been run down since the early 1990s.

Secondary school pupils from the Highlands & Islands achieve relatively high levels of educational attainment compared with the average in the UK

Estimated levels of GDP per capita relative to the EU average have steadily, fallen since the region gained Objective 1 status in 1994.

Highlands & Islands is a region of outstanding environmental quality with over 14% of the area designated as sites of Special Scientific Interest (SSSIs).

The region has relatively little air or water pollution. Rivers are of excellent or good quality in the Highlands. Here, drainage patterns run west to east, and this maintains high river quality in the larger east coast rivers, even in relatively well populated areas.

As a result of the low density of housing a significant part of the housing stock in not connected to mains sewerage systems.

3 KEY COMMUNITY POLICIES

3.1 STRUCTURAL FUNDS

There has been considerable emphasis on investment in transport and telecommunications infrastructure since the NPCI 1988-91. As a result of investments, many of which have received EC support, the region has “more trunk roads, ferry routes, railway stations and airports per head of population than any other part of the UK”. This infrastructure will have long term implications for revenue and capital support given the relatively low levels of users.

Objective 1 1994-99

Success in gaining EU support provided a step change in levels of Structural Fund support into the region.

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The region received some 324 MECU of support from EU grant through the Objective 1 programme 1994-99. The majority of funds came from the ERDF (187 MECU). There was a particular emphasis on transport and telecommunications infrastructure.

Community Initiatives ADAPT There was one approval under the ADAPT scheme for the Highlands and Islands. The University of the Highlands and Islands received £1,122,815 to enable greater access by businesses and individuals to high-quality learning opportunities even when located in the more remote parts of the region. It will help to exploit the network of 50 Learning Centres already established by academic partners of the UHI. Many of these were supported through the Objective One Programme.

EMPLOYMENT The EMPLOYMENT scheme is operated by Scottish Executive Development Department and made awards to five projects located in the Highlands and Islands. Their collective value came to £272,663 which brings the total value of all awards made to the Highlands and Islands through this Scheme to £1,259,998.

LEADER II The LEADER II Programme was operated by Highlands & Islands Enterprise and committed £10,133,397 of Structural Funds to some 1,773 projects. Many of these projects were pilots which led to successful applications under the Objective One Programme.

PESCA The PESCA Programme approved 232 projects during its lifetime, with a Structural Fund value of £1,759,952. Again, many feasibility studies were assisted under this project which led to FIFG and ERDF projects supported under the Objective One Programme.

RETEX II A total of 3 projects specific to the Highlands and Islands were approved with a Structural Fund intervention of £161,604. A further 8 projects were approved through the RETEX II Initiative which covered the whole of Scotland and included assistance to the Highlands and Islands. The Structural Fund value of these approvals was £529,325. 2 ‘Technical Facilitation Units’ have been established, one each in Orkney and Shetland. The Units are assisting local companies respond to technical change, providing innovative training and has promoted sustainable economic development for SMEs in the islands.

KONVER II A total of 8 projects within the Highlands and Islands area received assistance to the end of 1999 but 2 were subsequently withdrawn. The Structural Fund value of projects approved under this Initiative is £725,000.

SME The Initiative, operated by Highlands & Islands Enterprise, approved 15 ERDF projects totalling EU funding of £1,952,649 and 4 ESF projects totalling £128,943. Key achievements under this Initiative have been the establishment of a network of local Business Information Source offices (BIS) throughout the Highlands and Islands; access to help for innovation through business incubator units, the Expert Help Programme, patent and RTD grant information through the BIS network; and access to help for business co-operation and public procurement through the European Business Services/European Information Centre. Many complementary projects were supported under Priority One of the Objective One Programme which strengthened these investments.

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HIS Special Transition Programme 2000-2006.

The Special Transition Programme will inject a further 308.5 MECU into the Highlands & Islands, with funding support for projects in Western Isles, Orkney and Shetland until 2006 and other parts of Highlands & Islands until 2005.

Some concern was expressed that the current programme had added ‘extra’ hoops of bureaucracy at a time when national policy had moved towards social justice and social inclusion agendas. This meant that more local authority spend had been diverted into these areas reducing the capacity of local authorities to find matched funding for EU Structural Fund supported projects, contributing to a net reduction in competition for funds. It was suggested that the programme was currently in a period of conflict between trying to be innovative and spending the allocated money, and would quickly need to adopt a more pragmatic approach.

Owing to the continued emphasis on capital infrastructure projects combined with several large region-wide HIE projects, the programme is not facing the sort of n+2 target crisis that some other UK regions are understood to be facing.

3.2 CAP

CAP pillar 1 payments per annum to farmers in the region have typically exceed twice the total level of Structural Fund support in the region.

CAP funding together with national government support have brought over 100 Mecus of support to farmers in the region.

3.3 ENVIRONMENT

Environment related expenditure has been relatively modest in relation to overall EU spend. Partly as a result of EU policies environmental considerations have become more prominent. For example all projects applying for funds from the Transitional Programme are required to assess the contribution to environmental sustainability

3.4 STATE AIDS

Support in the form of State Aids is not believed to have been significant in scale relative to Structural Fund and CAP support.

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4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO SOCIAL AND ECONOMIC COHESION

Over the past decade or so the population in the Highlands & Islands as a whole has increased slightly and levels of unemployment have fallen. Unemployment remains higher than Scottish and UK averages. In June 1999 the unemployment rate for the HIS fell below 5% for the first time this decade.

Overall levels of employment have increased despite the demise of the oil fabrication industry with the loss of some 4000 jobs. New activities have emerged including call centres, medical products and pharmaceuticals, and more recently offshore wind power generation.

Estimated levels of GDP per capita relative to the EU average have steadily, fallen since the region gained Objective 1 status in 1994. While the area has experienced an overall growing population and diversifying economy, the performance of the economy continues to lag behind Scotland and the UK. In 1993, the area's GDP was 80% of the Scottish figure and 79% of the UK figure. By 1998, despite an increase of 31%, the Highlands and Islands GDP of £9,645 per head was 78% of Scottish GDP and 75% of UK GDP. GDP per capita figures suggest a rise relative to the EU average only to fall again more recently. It should be noted that because of the relatively small populations and sample sizes involved the reliability of the GDP figures is uncertain and indeed estimates fluctuate from year to year and upon the methods used.

Concern was expressed that the relative prosperity of the more densely populated areas around Inverness together with oil revenues coming into Orkney and Shetland might mask the underlying problems of large parts of the region particularly on its remote western fringes.

Uneven growth within the region has occurred and marked differences between in the economic prosperity of different parts of the region remain and in some cases such differences have widened. Differences in GDP per capita range from 78% of the UK total in the Orkney Islands to 67% of the UK total in Caithness and Sutherland and Ross and Cromarty (1998 figures).

Orkney and Shetland have both benefited from significant oil revenues. Service sector growth has been heavily concentrated in Inverness and Nairn and this has helped to boost this area to the extent to which levels of GDP per capita are above the EU average. Other parts of the region have performed less well.

Other changes during the last decade or so have also been uneven. There has been relatively strong net in migration into the more populous areas of Ross and Cromarty, Inverness and Nairn and Moray, Badenoch and Strathspey from other regions, which has led to relatively strong population growth in those areas. Relatively high unemployment in some of the more remote parts of the region remain, as does a greater reliance on seasonal and part time employment.

The Ecotec Ex-ante Evaluation of the 2000-2006 Special Programme suggested that area targeting should be a “stronger feature than in the Objective 1 programme and the relative needs of different areas be “explicitly acknowledged”. The result has been the explicit prioritisation of “Fragile Areas” within the 2000-2006 Programme where different weightings have been introduced which take into account the greater need and the higher cost of generating outputs and outcomes in some of the most peripheral parts of the region.

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Unemployment in HIS remains highly seasonal with peaks during the winter months and troughs during the summer months. Moreover, there are remaining problems of part time and underemployment particularly within the ‘Fragile areas’ on the western and northern fringes of the region.

The Inverness area has expanded significantly over the past decade. Further relative growth can be anticipated over the remainder of the 2000-2006 programme period with continuing service sector growth. Scottish Natural Heritage are understood to be planning to relocate over 200 jobs to Inverness.

Improvement of infrastructure to address problems of isolation, such as improved ferry routes significantly reducing journey times, can be expected to have reduced isolation by increasing the propensity to travel, improved communication within the region and improved access to training An unintended outcome of significant infrastructure investment may have been a the rapid expansion in retail floorspace and retail employment in Inverness. Those on the periphery of the region might have increased their levels of spending on shops and services in Inverness.

Programming method of delivery has encouraged co-ordination and partnership, perhaps reflecting a gradual process by the EC to develop ‘soft’ infrastructure at a regional level. Sub-regional ‘Objective 1 Groups’ have been formed to monitor progress and bring forward projects from partners. The take up of funds in different parts of the region has been uneven, and the proportions of the funds received from different measures within the programme even more uneven potentially reflecting differences in the capacity to formulate projects and secure matched funding.

The needs and priorities of the Highlands and Islands vary across the region. EU funding has presented an opportunity and helped to provide the stimulus for the region to present itself as a coherent entity, and appears to have assisted in the development of an understanding of shared problems and opportunities. A consensus has developed within the region regarding economic development priorities, enabling regional actors to present a clear articulation of the region’s needs.

On the downside there is a remaining reliance on seasonal and part time employment particularly in the case of women.

4.1 STRUCTURAL FUNDS

The scale of Structural Fund support has been such that levels of employment and GDP can be expected to have been boosted by the scale of physical infrastructure investment.

Although EU Structural Funds represent only a small proportion of the total public spend within the region, it was widely regarded that they had made an important difference, not least in terms of bringing key infrastructure investments forward.

More importantly the Structural Funds may have maintained the operation of an integrated ‘regional policy’ within the Highlands & Islands. Without Structural Funding it is uncertain whether the UK government would have fully filled the gap with increased levels of economic development related spending.

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Structural Funds have helped to achieve several major infrastructure projects including:

- expansions of Inverness International Airport and Stornaway Airport - the upgrade of every major ferry harbour to allow stronger transport links - increased research and development activity - new multi-use community facilities - state-of-the-art learning facilities in remote areas - mobile telephony and digital telecommunications improvements - diverse training provision developing skills across the region through the University of the Highlands and Islands (UHI).

Improvements in transport and telecommunications infrastructure are associated by those in the region with the growth of new activities including tele-service industries and a growth in home based telework. Call centres now employ some 2,000 people in the region.

Over recent years the majority of new high valued added services are understood to have developed in and around Inverness. Transport infrastructure improvements have largely improved intra regional transport communications. This infrastructure has undoubtedly strengthened Inverness’ role as the regional service centre which is most visibly evident in the form of large new retail developments in the town.

There are also several notable examples of new innovative businesses which have even been established in the more remote areas of the region. One of which is ‘Work Global’ which provides indexing and editing services for publishing companies. The business uses a register of over 200 ‘teleworkers’ living on the Western Isles. Another is ‘Madasafish.com’.

The University of the Highlands and Islands (UHI) has been created with Structural Fund and UK Lottery Fund support, to offer higher education courses across the area. The UHI has a unique structure tailored to the dispersed nature of population within the HIS region. Flexible learning courses cater for the most remote parts of the Highlands and Islands, offering lectures by video conference and CD ROM work programmes. Much of the investment to date has been in developing the ICT infrastructure for the University. “The opportunity now exists to build upon these structures and the development of Community Learning Networks and Local Learning Centres, and this might be drawn out in the Programme Complement. The building programmes of UHI academic partners are also still to be completed, and research capability developed to the levels of established universities” (ECOTEC, Ex-ante Evaluation of the Highlands and Islands Special Programme 2000-2006).

It was suggested that the requirement for a programmatic approach had improved the strategic focus and co-ordination of regional policy, and improved monitoring and evaluation. It was suggested that the regional priorities (to develop the regional economy in order to retain populations and communities) were well established prior to EU Structural Funds, and that Structural Funds had been used to focus on these regional priorities.

Without Structural Fund support post-2006 the region will need substantial national government investment if current population levels are to be maintained and the gap in GDP per capita not to widen further.

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4.2 FISHERIES POLICIES

The waters off the west coast of Scotland have been over-fished with steadily reducing stock levels over many decades. It appears to be accepted by policy officers in the region that a co-ordinated European policy to reduce catches is necessary. Concern however was expressed in the region that other countries were using EU funds to modernise vessels and that if there is a recovery in stock levels the region would be poorly placed to take advantage.

Within the Highlands and Islands coastal fishing is more important than it is at the Scottish scale. Concern was expressed that the interests of the Scottish white fish fleet had benefited from the Highlands and Islands FIFG programme at the expense of the coastal fishing fleet.

The Salmon Industry has over recent years faced a slump in world prices as supply has grown ahead of demand, and lower cost producers (notably Chile) have increased their levels of stock output. Many sites are struggling to survive financially and several could close in areas where the salmon farm is the main local employer. FIFG funds have been used to try to diversify into new species of fin fish and into shell fish.

The Salmon industry in the Highlands and Islands is increasingly foreign owned. Multi- national salmon producers, having ownership of sites and access to matched funds, have dominated the successful applications for aquaculture funds.

4.3 AGRICULTURAL POLICY

CAP provides a valuable boost to the regional economy (around 100 Meuros per annum). Without CAP it is uncertain whether the number of farms and crofts that remain in existence would be as high. Farming methods could be expected to have become more extensive, particularly in the West of the region with the resultant loss of many crofts.

Some parts of the economy remain heavily dependent on agriculture as a source of employment. In Orkney almost a quarter of all workers are employed in agriculture and in other parts of the region there are local communities almost entirely dependent on primary industries.

Much of the land to the West of the region is of poor agricultural quality. Many of the farms in this area are ‘Crofts’. Croft owners are afforded special rights and also have access to special subsidies including subsidy for new house building. Many crofts are very small in size and crofters are typically employed in other sectors with farming forming no more than a spare time income supplement. Part time farmers and crofters no longer manage extensive grazing across the fells, as a result it was suggested that some areas have become overgrazed and others undergrazed – affecting the balance of historic landscapes and habitats.

Much of the current landscape has been significantly influenced by a mix of cattle and sheep grazing.

It was suggested that the pattern of CAP subsidies had led to an over-reliance on sheep. It was also suggested that head-count subsidies in some case exceeded the value of the stock and that this encouraged farmers to:

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Retain stock for the minimum retention period Not invest in stock breeding and stock improvement.

One respondent suggested that in such areas CAP subsidies had become housing subsidies, encouraging crofters and their families to maintain some tie with agriculture. Income from this ‘part-farming’ has provided a valuable boost to incomes in crofting areas. Low wages and in some cases seasonal employment when coupled with CAP subsidies have been sufficient to retain many crofting families in situ. CAP subsidies may therefore have provided a crude but potentially useful break on population decline and associated loss of Gaelic language and culture.

It was also suggested that CAP subsidies have, also provided a break on rural adaptation on development. Had subsidy levels not been so high more crofters could be expected to have sold up and more incomers bought properties, and brought with them wealth and in some cases viable businesses. It is a subject of speculation however the proportion that would be bought as holiday homes and the proportion that would have been bought as permanent residences and thus the extent of local economic costs and benefits from CAP reform.

To the East of the region due to a combination of larger farm size and better land quality many farmers had been able to use significant CAP funds to modernise and create profitable, efficient farms.

4.4 COMPETITION POLICY

Competition Policy and the creation of the Single European Market appear to have, together with increased liberalisation, contributed to higher levels of trade and potentially to rising levels of prosperity. The effects of Competition Policy have been uneven. As a relatively isolated region on the north west fringe of the European Union there are in many cases greater costs involved in distributing goods and services across Europe. Even though the ‘lions share’ of EU Structural funds within the region have been spent over the past 15 years on transport and telecommunications infrastructure, the region has become arguably more peripheral

4.5 ENVIRONMENTAL POLICIES

It was generally felt that EU environmental regulations had not had a huge effect on the Highlands and Islands and that the region had been exposed to far greater ‘external shocks’.

The EU has potentially had a role in encouraging (eventually) the UK government to set UK targets on the generation of power from renewable energy sources. This move can over the next decade or more be expected to bring a significant boost to the ‘Fragile areas’ at the northern and western fringes of the HIS region. These areas have truly exceptional potential within the EU context for offshore wind and wave power generation. There has already been some local employment generation, for example in building turbine towers.

Some environmental directives may have benefited the region. The ‘Water’ directive is likely to have increased the rate of investment in cleaning up sewerage emissions to the benefit of the region.

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5 COORDINATION BETWEEN THE COMMUNITY POLICIES

As suggested in the above section, the historic structure farming on the Western fringes of the region when combined with the ‘head count’ structure of CAP payments may have resulted in the ineffective movement of stock, some areas becoming overgrazed and others under-grazed. The overgrazing of some upland and island areas was considered likely to conflict with the EU ‘Habitat Directive’.

There appeared to be a degree of tension between management of programmes at the regional level and management at the Scottish level. For example, the FIFG scheme has been administered by the Scottish Executive. The Sea Fishing Industry Authority and Sea Food Scotland have both received FIFG funds. Projects had gone ahead which, had the regional partners been administering the programme, might not have been funded. It was also suggested that there had been relatively little integration of funding to support fishermen and funding to support fishing communities which may have constrained the overall effectiveness of measures to develop rural communities.

The Scottish Office together with the Department of Trade and Industry within the UK Government carefully assess the contribution EU policies make to Scottish and UK policies in order to try to ensure effective synergy with regional and national policies.

6 GOVERNANCE ISSUES

6.1 COMMUNITY PROGRAMME MANAGEMENT

Structures of governance for the region relating to European policies are split mainly between the Highlands and Islands and Scottish level.

Since 1994, most of the Structural Fund allocation to the region, has been administered by the Highlands and Islands Partnership. CAP, EAGGF and FIFG funding however has continued to be managed by the Scottish Department of Agriculture (SERAD) in Edinburgh.

6.2 COORDINATION OF STRUCTURAL FUNDS

There has been a strong degree of continuation from the Objective 5b programme (1989-93) throughout the Objective 1 Programme (1994-99) and currently into the Special Transitional Programme. Also within the region the structure of governance is relatively simple, with a small number of key authorities and agencies. Given the size of the population of the region, Highlands and Islands Enterprise and the local authorities are all relatively well resourced. This strategy continuation together with a relatively small number of key partners has led to:

clear and consistent articulation of needs and priorities by different partners close involvement of partners in strategy formulation

This may have afforded the region flexibility from DG Regio to allow region to spend a significant proportion of funds on infrastructure projects (which may in turn have facilitated

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FINAL REPORT (ANNEX I) relatively efficient administration and programme spend since many such projects are already designed prior to programme design).

6.3 DECENTRALISATION

There has been an attempt within the major Structural Fund programmes to decentralise some activity and create ‘bottom up’, ‘local level’ infrastructures for the design and delivery of projects and strategies. The Community Initiative ‘Leader’ led to the creation of local community partnerships. These were typically made up of officers from public agencies operating in the local area together with representatives from selected voluntary bodies operating in the locality. In a few cases these partnerships have continued to develop and continue beyond the period of funding. The Partnership for Rural Inverness and Nairn involves not only all the key agencies but also community organisations, the National Farmers Union and various voluntary organisations.

It was suggested that, more generally Local Partnerships have been largely made up of officers representing partner organisations with the capacity to develop and match fund projects. These partnerships can be expected to have helped to widen expertise in accessing EU funds and may have increased ‘shared’ understandings of local problems, opportunities and investment priorities. These structures are in place to access Structural Funds. Without Structural Fund support the long-term sustainability of local partnerships is uncertain.

The institutional capacity of local partnerships to develop, bid for and draw down EU Structural Funds appears to have varied, with different areas achieving different levels of success in securing funds. It was suggested that the ability of different areas to secure matched funding was uneven, and moreover that those areas with arguably more access to matched funds had less of a requirement for EU Structural Funds.

Overall, the formation of partnerships and groups to respond to the funding opportunities afforded by EU funding has generated a greater capacity at the local level to develop economic development projects and strategies particularly within local authorities. It was suggested for example that following the closure of the aluminium smelter at Kinlochleven, EU partnerships had provided a vehicle to encourage the relevant agencies to work effectively together.

An increased emphasis on ‘sustainability appraisal’ has been introduced. Guidance notes developed as part of the Strategic Environmental Assessment were issued to all applicants in 1997, and this has become an integral part of the Operational Guidelines issued by the Programme Management Executive to prospective applicants. In addition, each Advisory Group had at least one environmental expert to ensure an appraisal of environmental issues has been undertaken. It is unclear at this stage whether this kind of effort to raise institutional capacity is raising the effectiveness of supported investments or whether it is simply adding to bureaucratic costs.

It was generally accepted that the ‘programmatic’ approach had brought together all of the key agencies with responsibility for different areas of economic development and given the region a ‘strategic background’. (Despite marked differences in industrial structure and in GDP per capita between different parts of the region we found a striking degree of consensus regarding which projects had made a difference and the nature of the region’s problems).

One respondent considered that although the Structural Funds had added to strategic planning, monitoring and bidding capacity of public authorities in the region, the UK ‘Lottery’

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FINAL REPORT (ANNEX I) funds had done more to change the institutional ‘landscape’ and develop capacity by significantly widening the base of those able to access funds.

Community Initiatives such as Leader appear to have been used creatively to set up or pilot projects which have then become mainstreamed into the main ‘Transition’ programme. One problem is that Leader + funds have competed with the Community Economic development priority of the ‘Transition’ programme.

7 CONCLUSIONS

Significant investments have been made in an attempt to overcome the extreme peripherality of the more remote parts of the region.

The region has invested heavily with EU support in a modern telecommunications infrastructure, new roads, ferries airports. As the speed of transport and telecoms connectivity across Europe continues to increase further investment would be needed for the region not to become ever more peripheral.

The maintenance of indigenous population and in particular of crofting communities, the maintenance and development of Gaelic language and culture and the achievement of comparable raises in standards of living will only be achievable with a continuation of long term investment and subsidy.

Structural Funds together with CAP funds have injected significant resources into the region. It remains uncertain whether if post-2006, Structural Funds are greatly diminished, the Scottish and UK governments will fully fill the funding vacuum.

8 GUIDELINES FOR COMMUNITY ACTION

- Fund technical support to assist less experienced project promoters through the process of applying for funds and then monitoring projects.

- Insist that regional administrations reduce complexity of the Structural Funds application process.

- Assess likely impact of proposed projects (if necessary in the case of large projects using ‘technical support’)

- fund projects on the basis of directly linked outputs only. For example in the case of a factory unit the output should be simply the amount of floorspace created, not the number of jobs housed. The project should only be funded if the evidence of demand and market failure are effectively demonstrated.

- Seek CAP reforms that will support communities as well as farmers, but which are administered in a way that will not lead to significant leakage into administrative costs.

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- Encourage bottom up capacity building but not at the cost of project quality or significantly reduced administrative efficiency.

- Ensure that measures are in place to avoid the exclusion of smaller projects and less experienced project promoters.

- Encourage additionality, innovation and risk taking by maintaining high intervention rates.

- Fund integrated strategies at local area level – a balanced strategy at the regional level may result in a piecemeal or scattergun allocation across a vast region with very different needs and opportunities.

- Fund partnerships to develop coherent area strategies and ensure that they are inclusive and extend beyond the direct remit of the Structural Funds.

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APPENDIX

COHESION INDICATORS

Indicators obtained for Highlands & Islands are listed in the table below - see attached files for detail.

Demographic Migration (inter-regional movements as % of 2001 census % moving in to the regions (for working age population) council area) Scotland: Net inter-regional movements, 1991- 2001 (no data for 2000) Social class of working age population Socio-econ class for 2001 only, using NS-SEC classification, council areas Scotland: 1993-2000 social class I-V; 2002 NS- SEC; 2001 NS-SEC Population of ethnic minority groups as % of 1991 & 2001 census ethnic population for council total regional population areas 1993-2001 Scotland Economic Regional GDP per head 1993-1998 at current basic prices (£ per head & per head index, UK = 100) Average gross weekly earnings Scotland 1990-2000, by gender. H&I 1999 only, by gender R&D employment as % of the regional No data workforce Poverty & social exclusion Unemployment Scotland: 1992-2002 H&I: estimated number of unemployed at council level (& % change between Feb 2002 & 2003, also at council level) Benefit claimants (incapacity or disablement) Scotland: 1993/94-1999/00 Education Educational attainment (degree/ GCSE/ no For 2001 only, council areas. qualification) Scotland: 1990-2002 (no data for 1997 & 1999) Environment Household recycling rates Patchy – available for 3 of the 5 HI& council regions, no year given. Greenhouse gas emissions

Emissions of air pollutants (carbon monoxide; methane (under GHG); nitrous oxides; non-methane volatile organic compounds) Agriculture Agricultural legal units as a % of total legal 2001 & council area only

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FINAL REPORT (ANNEX I) units % of GDP derived from agriculture Scotland: 1990-1998 Agricultural holdings by area of crops & 2001 & Scotland only grass, and by land use.

POLICY EXPENDITURES

Data requested – awaiting response

REPORTS OBTAINED

- 1994-99 Programme: Intermediate Assessment

- Evaluation Strategy: European Structural Funds Interventions in Scotland 2000- 2006 (Scottish Executive)

- Ex Ante Evaluation of the H&I Special Programme 2000-2006

- Highlands and Islands 1994-99 Objective 1 Programme: Final Report CONFIDENTIAL – NOT FOR PUBLICATION/DISCUSSION

- Highlands & Islands Special Transitional Programme 2000-2006: Programme Complement and Annexes

- Highlands & Islands Special Transitional Programme 2000-2006: Annual Review Document (2000)

- Highlands & Islands Special Transitional Programme 2000-2006: Annual Implementation Report 2001 - Highlands & Islands Special Transitional Objective 1 Programme 2000-2006: Programme Summary

- Highlands & Islands Special Transitional Programme 2000-2006: Programme Update (2002)

- Scottish Parliament Rural Affairs Committee 6th report, 1999 – Highlands and Islands Agricultural Programme (HIAP): Agricultural Business Improvement Scheme (ABIS)

- Sustainability Appraisal of Regional Development Assistance in Remote Rural Economies: The Case of the Scottish Highlands and Islands, Tony Jackson, Dundee University Working copy, not to be quoted

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Index of tables included in ANNEX II

Excel File Name Table/Chart Title agric-gdp.xls A regional comparison of the contribution of agriculture, hunting, forestry and fishing to GDP (1990-1998) [West Midlands/Scotland/Northern Ireland/UK] [Chart] agric-gdp.xls % of gross domestic product (GDP) derived from agriculture [West Midlands/Scotland/Northern Ireland/UK] [Table] agricholdings-land- Agricultural holdings: by area of crops and grass, and by use.xls land use, June 2001 [all UK regions] [Table] benefit-recipients.xls Households in receipt of benefit: by type of benefit [West Midlands/Scotland/UK] [Table] earnings.xls Average gross weekly earnings: by gender [West Midlands/Scotland/Northern Ireland/UK 1999- 2000; Highlands & Islands region 1999 only] [Table] ethnic.xls Regional distribution (%) of the minority ethnic population, April 2001 [all UK regions] [Table] ethnic.xls Distribution (%) of ethnic groups within regions, April 2001 [West Midlands/Scotland/Northern Ireland/UK] [Table] ethnic.xls Ethnic groups 2001 [Highlands & Islands councils (sub-regional) & Scotland] [Table] GDP.xls Gross domestic product (GDP) at current basic prices 1993-1998 (£ per head and per head index) [West Midlands/Scotland/Highlands & Islands/Northern Ireland/UK] [Table] migration.xls Regional comparison of net population change from internal migration (1990-2001; no data for 2000) [West Midlands/Scotland/Northern Ireland] [Chart]

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FINAL REPORT (ANNEX I) migration.xls Inter-regional movements 1991-2001 [no data for 2000] [West Midlands/Scotland/Northern Ireland] [Table] migration.xls Migration – Highlands & Islands sub-regional level, 2001 [Table] no-of-agric-units.xls Agricultural legal units as a % of total legal units, 2001 [West Midlands/Scotland/Northern Ireland/UK] [Table] qualifications.xls Educational qualifications of the workforce 1990-2002 [no data for 1997] [West Midlands/Scotland/Northern Ireland] [Table] qualifications.xls Qualifications, Highlands & Islands council area (sub- regional), 2001 [Table] social-class.xls Social class of economically active population (%) 1993- 2000 [West Midlands/Scotland/Northern Ireland/UK] [Table] social-class.xls Socio-economic classification, 2001 [Highland & Island council areas (sub-regional) and Scotland] [Table] social-class.xls Socio-economic classification by region, 2001 [West Midlands/Northern Ireland] [Table] social-class.xls Socio-economic classification as a % of workforce 2001 [West Midlands/Scotland/Northern Ireland] [Table] unemployment_rates. Unemployment rates 1992-2002 (% at Spring each year) xls [all UK regions] [Table] NI structural fund Northern Ireland Structural Fund spend spend.xls [Table] NIagric.xls Direct payments and levies included in the Aggregate Agricultural Account 1981-2002 [Table] NIagricgrants.xls Capital grants and other direct payments not included in the Aggregate Agricultural Account 1981-2002 [Table]

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UNITED KINGDOM:

REGION: NORTHERN IRELAND

ELABORATION:

Author: David Bradley

From: CURDS. CENTRE FOR URBAN AND REGIONAL DEVELOPMENT STUDIES. University of NEWCASTLE UPON TYNE. UNITED KINGDOM.

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ANALYSIS OF THE IMPACT OF COMMUNITY POLICIES ON REGIONAL COHESION: THE CASE STUDY OF NORTHERN IRELAND. UNITED KINGDOM

EXECUTIVE SUMMARY

INTRODUCTION

For more than 30 years the region has suffered from sectarian conflict. This conflict has created a significant barrier to the attainment of economic and cohesion.

Reduced levels of violence may have led to increased levels of investment and prosperity in Northern Ireland, particularly within Belfast.

Northern Ireland as well as being a NUTS II region, is a nation within the United Kingdom and as a result has, since its formation had relatively well developed structures of ‘regional’ administration.

PROGRESS TOWARDS COHESION

In terms of most socio-economic indicators Northern Ireland continues to perform significantly less well than the UK average.

The Northern Ireland economy has to a large degree followed the economic cycle and growth trends of the UK as a whole. The gap in levels of GDP has narrowed slightly, however, changes across other indicators have in many cases been tracked in parallel with a significant gap between Northern Ireland and the whole of the UK remaining.

Economic growth has been concentrated in and around Belfast and as a result intra-regional differences in GDP per capita have widened.

EFFECT OF COMMUNITY POLICIES

There has been some narrowing of the gap between EU and Northern Ireland GDP per capita. Reduced levels of violence and the prospect of reduced levels of sectarian conflict can be expected to have had an effect.

The very existence of the EU together with specific initiatives (such as the PEACE programmes I and II and INTERREG 1 and 3a) are believed to have contributed to the scale of the current and future ‘peace dividend’.

The combined effect of ‘other’ Community Policies including the Structural Funds is considered particularly difficult to disentangle within this context.

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In the absence of support, a widening of the gap between Northern Ireland and other UK regions might have been expected given the unfavourable economic structure of the region and historically low levels of productivity. It could be expected that the funds have helped to address structural weaknesses.

Competition Policy and the creation of the Single European Market appear to have, together with increased liberalisation, contributed to higher levels of trade and potentially to rising levels of prosperity. The effects of Competition Policy have been uneven. As a relatively isolated region on the north west fringe of the European Union there are in many cases greater costs involved in distributing goods and services across Europe. Competition Policy can therefore be expected to have disadvantaged Northern Ireland.

Institutions within the region have had some success in securing funds through the European R&D Framework Programmes. The region has invested significantly in new transport infrastructure through the use of Structural Funds, funding has however not come through TEN-T. These two policies can both be expected to have encouraged centripetal tendencies to agglomerate economic activity in the ‘core’, most accessible regions and thus further disadvantage Northern Ireland.

COORDINATION BETWEEN POLICIES

Structural Funds, through both main programmes and Community Initiatives, are carefully co-ordinated by Northern Ireland’s Government Departments.

There appears to be close inter-departmental working and strategy co- ordination. In particular the Department of Agriculture is understood to have a more direct involvement in formulating rural development policies than is generally the case in UK regions, and indeed plays a significant role in rural development which goes beyond the direct provision of support to farmers.

Environmental issues have tended to take a back seat in Northern Ireland with other challenges such as reducing levels of sectarian conflict, improving productivity and equality gaining more attention. The region now faces environmental issues that will require significant investment to address, if it is to conform to all EU environment related directives.

Eutrophication of several inland lakes is occurring. This is posing an inter- departmental challenge for the region not least to decide which department should take the lead, how the problem can be addressed and who should contribute to the cost.

R&D actions are woven into a number of the programmes receiving Structural Fund support.

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GOVERNANCE

Government in Northern Ireland has for several decades at least been highly centralised within Government Offices in Belfast. Between 1973 and 2001 the region was under ‘direct rule’ from the UK Government in Whitehall. There has been only a brief period since then when the elected assembly has not been suspended. The region has nevertheless operated with a significant degree of autonomy operating within a ‘single pot’ allocated to the region of some £8 billion per annum. Local Government in Northern Ireland is relatively weak, with District Councils operating with a limited range of powers (traditionally covering ‘bins and burials’) in comparison to their UK mainland counterparts.

The local governance ‘deficit’ has to a degree been filled by charitable and voluntary sector activities. Unusually, voluntary sector bodies have been amongst those responsible for managing significant amounts of EU funding within the region.

There has been an attempt within the major Structural Fund programmes to decentralise activity and create ‘bottom up’, ‘local level’ infrastructures for the design and delivery of projects and strategies.

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INDEX

1 METHODOLOGICAL ISSUES

2 CONTEXT AND BACKGROUND

3 MAIN COMMUNITY POLICIES 3.1 STRUCTURAL FUNDS 3.2 CAP 3.3 RESEARCH AND DEVELOPMENT (R&D) AND INNOVATION 3.4 STATE AIDS 3.5 ENVIRONMENT

4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO SOCIAL AND ECONOMIC COHESION IN THE REGION

5 CONTRIBUTION OF THE COMMUNITY POLICIES TO THE COHESION IN THE REGION 5.1 INTRODUCTION 5.2 STRUCTURAL FUNDS

6 COORDINATION BETWEEN THE COMMUNITY POLICIES

7 GOVERNANCE ISSUES 7.1 COMMUNITY PROGRAMME MANAGEMENT 7.2 CO-OPERATION AND PARTNERSHIP 7.3 DECENTRALISATION 7.4 TRANSPARENCY

8 CONCLUSIONS

9 GUIDELINES FOR COMMUNITY ACTION

APPENDIX

COHESION INDICATORS POLICY EXPENDITURES REPORTS OBTAINED INDEX OF TABLES INCLUDED IN ANNEX II

Index of tables

Table 1: Community Support Framework NI 235

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1 METHODOLOGICAL ISSUES

In comparison with the other UK case study regions the task of obtaining both expenditure data and data on economic, social and environmental indicators was found to be relatively unproblematic.

The research has been necessarily broad brush relying on the advice and guidance of contacts within the region. It must be stressed that the research cannot hope to be either definitive or comprehensive. The budget for this case study research did not allow for a comprehensive analysis of regional economic performance, community policies, national spending, governance or co-ordination issues.

The analysis and subsequent conclusions are based on analysis of key economic and social indicators, analysis of expenditure data and discussions with key actors in the region with responsibility for managing relevant national and/or Community Programmes.

We have been unable to identify official studies which have attempted to tease out the contribution of the various Community Policies on the region.

There is considerable doubt whether the allocation of Structural Funds has significantly improved the targeting of funds relating to economic development. It would however be a task well beyond the scope of this study to try to tease out the extent to which the scale and direction of funding has been affected by the Structural Funds.

Within Northern Ireland, evaluations are carried out by several different government bodies, including the Department of Finance and Personnel (DFPNI) for general Structural Funds evaluations, but additionally the Department of Agriculture and Rural Development (DARDNI) and the Department of the Environment (DOENI), making information gathering a somewhat fragmented process.

2 CONTEXT AND BACKGROUND

Northern Ireland covers an area of some 13, 576 sq km and a population of some 1.69 million. For more than 30 years the region has suffered from sectarian conflict. This conflict has created a significant barrier to the attainment of economic and social cohesion.

Northern Ireland has over recent decades lagged behind the UK economy. In terms of most socio-economic indicators Northern Ireland continues to perform significantly less well than the UK average.

The Northern Ireland economy has to a large degree followed the economic cycle and growth trends of the UK as a whole. Changes have in many cases been tracked in parallel with a significant gap between Northern Ireland and the whole of the UK remaining.

Northern Ireland is one of the most rural parts of the UK. Its rural economy faces particular problems because of the predominance of small farms. Many farms in NI now have too few livestock or crops to provide a full-time occupation for one person. Most larger farms provide full-time employment for only one person with the support of part-time assistance.

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The region is also more dependant on declining industrial sectors such as food, drink and tobacco and textiles and clothing, and is underrepresented in so called ‘high tech’ industries. The region attracted low levels of inward investment during the 1980s and 1990s, in comparison with the Republic of Ireland and mainland Britain.

Northern Ireland continues to suffer from the deep rooted problem of low labour productivity.

Although levels of tourism over recent years have increased, this has been from a relatively low baseline. The region continues to attract low levels of tourism, with 2% of GDP from tourism compared with 6% in both Scotland and Eire. This does, however, represent a significant opportunity for future development.

There are large areas within NI of high environmental quality and as a result of a slowness to incorporate modern farming methods many hedgerows and dry-stone walls remain intact. There are however very limited amounts of land covered by native broad leafed woodland.

Although levels of nitrate runoff are by no means exceptional owing to the geology and topography of the region, eutrophication of several inland lake is taking place.

3 MAIN COMMUNITY POLICIES

3.1 STRUCTURAL FUNDS

Northern Ireland received a total allocation of some 2 billion EURO of Structural Fund support during the 1990s. Current Structural Fund allocations average in the region of just over 200 million Euros a year. Those experts consulted who were willing to gauge total public sector spend on ‘economic development’ suggested the overall spend for Northern Ireland to be in the region of 1.3 billion Euros per annum. Structural Funds thus provide an important boost if indeed all the funds are truly additional (i.e. in the absence of Structural Funds the UK Government would not increase at all the size of the ‘Single Pot’ allocated to the region).

Gaining Objective 1 status in 1994 led to a step change in levels of Structural Fund support. The main instruments have been through the Northern Ireland Single Programme (NISP), which allocated some 1.278 Meuro and through the Special Programme for Peace and Reconciliation (PEACE) which allocated some 402 Meuro of Structural Fund support. Overall during the period 1994 –2000 Northern Ireland received just over 300 Meuro per annum in support from the Structural Funds.

Prior to 1994 the main emphasis was on physical infrastructure projects. The UK Government at the time regarded UK economic development and regional policy as its responsibility. The net financial benefit, prior to 1994, to either individual project applicants or the regional economy is uncertain and is likely to have been relatively modest.

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Mecu Mecu p.a 1989-93 Community Support Framework NI 793 158.6

Meuro Meuro p.a 1994-99 Objective 1 SPD 1277.9 PEACE I 402 Interreg 69.3 Urban 19.4 Employment 12.8 Leader 12.5 SMEs 6.2 Retex 5.1 Adapt 3.5 Konver 3.4 Pesca 2.2 1814.3 302.4

Meuro Meuro p.a 2000-06 Building Sustainable Prosperity 890.5 PEACE II 402.5 Leader+ 15.4 Interreg III 81 Urban II 10 Equal 11.69 1411.09 201.6

Post 1994 it is widely regarded that the Peace Programme in particular, was innovative in its design and unique not only within the UK but also within the EU, and brought net additional funds to the region.

3.2 CAP

Agriculture related payments, including all direct payments and capital grants to farmers, exceed £4.3 billion (pounds sterling) since 1990. The majority of this spend has come from CAP (e.g. £134 million from CAP in 1999-00 (year end 31 March) compared with £24 million UK/regional government).

3.3 RESEARCH AND DEVELOPMENT (R&D) AND INNOVATION

Invest Northern Ireland consider that international connections that can be established can be an important route by which innovations can reach the market. The region has achieved a reasonable degree of success in drawing down funding from the Framework Programmes: FP4 - £12 million; FP5 - £15 million.

Additionally, there have been significant innovation and R&D strands in the main Structural Fund programmes.

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3.4 STATE AIDS

The Natural Gas subsidy to pay for the cost of long distance pipelines has brought natural gas to large parts of the region and reduced greatly the region’s dependence on oil imports.

Tighter controls regarding EU rules for State Aids together with UK wide guidelines from the DTI are perceived to have added to bureaucracy and delayed spend on projects.

Fears were expressed that if post-2006 parts of the Republic of Ireland bordering Northern Ireland areas that were no more prosperous would be still eligible for Objective 1 funding, this could potentially allow higher levels of state aid to be provided within a neighbouring region.

3.5 ENVIRONMENT

Environmental policies and investment have tended to receive low priority and have been considered largely as an ‘add on’.

The region has been slow to modernise old water and sewerage infrastructure, lagging well behind most other parts of the UK. Significant investment in sewerage treatment to improve bathing water quality will be required. Eutrophication of inland lakes is also a significant issue. The region faces very hefty fines from the EU unless it can manage the problem of eutrophication.

Although one of the Priorities within the ‘Building Sustainable Prosperity’ programme is ‘Environment’, the emphasis remains weak given the scale of the environment problems the region faces.

4 ASSESSMENT OF THE IMPACT OF COMMUNITY POLICIES RELATED TO ECONOMIC AND SOCIAL COHESION IN THE REGION

Between 1989 and 1997 there was some convergence between NI GDP and the UK from 76.4% of the UK total in 1989 to 80.4% in 1997.

However, sub-regional growth has been uneven. Whilst Belfast has experienced strong growth, the remaining NUTS III regions have remained relatively static, and in these sub-regions GDP per head has been at or below the Objective 1 threshold of 75% of the Eur 15.

Unemployment levels have fallen considerably over the period since 1989 at an even faster rate than in the rest of the UK. The employment rate in NI has also risen, however, this rise has been dominated by an increase in part-time jobs.

Major investments such as the gas pipeline and the electricity interconnector with Scotland have taken away Northern Ireland’s energy supply isolation and its exposure to energy market shocks. This investment can be expected to have a long term effect on energy costs and the attractiveness of the region for investment.

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In comparison with other parts of the UK there has been a historically low level of use of natural gas and instead a reliance on domestic solid fuels and oil. This has led to some urban areas having relatively high levels for pollutants associated with fossil fuel burning, notably sulphur dioxide. However as natural gas becomes more widely available, levels of ambient concentrations of air pollutants can be anticipated to decrease. In 2000 and 2001 all five monitoring sites, with the exception of Belfast East, met the 1st Daughter Directive limit values. (An apparent consequence of the improvement is a rise in ozone levels. Air pollutants can act as ‘scavengers’ of ozone, keeping down levels in urban areas).

5 CONTRIBUTION OF THE COMMUNITY POLICIES TO THE COHESION IN THE REGION

5.1 INTRODUCTION

Progression towards a sustained peace and lasting political settlement represents a key opportunity for the regional economy. It is particularly difficult to tease out the effects of community policies from the benefits arising from reduced levels of conflict in recent years. As with other regions with an unfavourable industrial structure it is virtually impossible to assess the counterfactual, since all EU regions suffering from the effects of restructuring have benefited from EU Structural Fund support.

5.2 STRUCTURAL FUNDS

Programme evaluations (during the 1990s) have suggested that overall the Structural Funds have made a ‘significant’ contribution to promoting economic and social cohesion, but that projects funded by ERDF have had a greater impact and been more effective than projects funded by ESF. One evaluation estimated “non-additionality for training projects to be extremely high at approximately 79%”(NI Structural Funds Plan – Ex-Ante Evaluation, 1999). Interviewees outside of Belfast, however, suggested that work remains to be done to promote cohesion at a sub-regional level, as demonstrated by the significant differences in GDP per head between Belfast and the rest of the region. One respondent suggested that standard economic tests are not always appropriate in assessing the suitability of a locality for particular interventions intended to support cohesion.

Structural Funds might have made a valuable contribution to preventing a widening of the ‘gap’ which could have occurred due to a combination of the region’s relative peripherality within the EU and its unfavourable economic structure.

Some of the investments - most notably those through the PEACE programmes - will, if successful, have mainly longer term impacts, for example in 10, 15 or more years time. It was suggested by a number of interviewees that the significance of the PEACE programmes in particular have been felt in building community capacity, and cross-community and cross- border relationships. More measurable economic outcomes to date are potentially of less relevance than long-term economic and social benefits of this capacity and relationship building.

5.2.1 Agricultural policy

CAP provides a valuable boost to the regional economy (well over 150 Meuros per annum).

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CAP subsidies, by favouring large arable farms, have contributed greater levels of public subsidy per hectare flowing into already more prosperous regions of Europe and hence could be expected to have a breaking effect on efforts to achieve convergence. This pattern of subsidies might also be expected to have also widened statistically unnoticed differences in wealth, income and opportunity within different parts of the region.

Within the region there remains a predominance of small-medium sized farms. By boosting farmers’ incomes, CAP can be expected to have helped maintain farmers and farming communities in situ. The extent to which this has acted as a break to reducing rural adaptation and breaking down sectarian divisions is extremely difficult to disentangle. Tourism remains weakly developed and Belfast is the only major business and financial service centre - there are consequently fewer opportunities for farms to diversify into new activities than is the case for many more populated and more visited parts of the UK.

Farming methods have potentially become more extensive, but the effects on boundary wall and hedgerow removal have been less dramatic than in many other parts of the UK. However, eutrophication of inland lakes has occurred. It remains an issue of debate regarding the extent to which more intensive farming methods have added to levels of nitrogen runoff and the extent to which this has been the primary cause of eutrophication.

5.2.2 Competition Policy

The effects of Competition Policy have been uneven. As a relatively isolated region on the north west fringe of the European Union, there are in many cases greater costs involved in distributing goods and services across Europe.

Even though a significant (albeit declining) share of EU Structural Funds within the region have been spent over the past 15 years on transport infrastructure, the region has become arguably more peripheral.

5.2.3 Research & Development

The region has gained a reasonable share of funds through the European R&D Framework Programmes. This policy can be expected to have both reinforced strengths and help to maintain relative levels of R&D and thus be expected to have had a broadly neutral effect on the region.

5.2.4 Trans European Networks

The region has invested significantly in new transport infrastructure through use of national and to a lesser extent Structural Funds. Funding has not come through TEN-T. The creation of major new road and rail networks tying other regions of Europe together, and in particular improving access to and from the core regions, serves to reduce in relative terms the accessibility of Northern Ireland. TEN-T investment is understood to have encouraged centripetal tendencies to agglomerate economic activity in the ‘core’ regions of Europe and thus can be expected to have undermined the effect of Structural Fund investments within the region with regards the achievement of economic cohesion.

5.2.5 Environmental Policies

It was generally felt that EU environmental regulations had been relatively ignored and thus not had a huge effect on the region. The region fails to meet several EU environmental directives. The extent to which these directives present a cost or a benefit to the region

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FINAL REPORT (ANNEX I) depends largely on who is to pay the for nitrate reductions, sewerage treatment, waste recycling and so on. The requirement to meet these directives within a very short space of time and even face fines could place a severe burden for the region if the cost is not borne by the UK taxpayer and / or the EU.

6 COORDINATION BETWEEN THE COMMUNITY POLICIES

The Department of Agriculture and Rural Development in Northern Ireland appears to be more closely involved with other government departments in the development of economic development strategies than would appear to be the case in other parts of the UK, as well as having greater responsibility for rural development.

Heavy fertilisation and intensive management of ryegrass ley and pasture, arguably encouraged by CAP, may have contributed to the eutrophication of inland lakes in the region. Those representing farming interests have however suggested that eutrophication is due to naturally high levels of phosphate rather than current farming methods. Failure to address this issue to the satisfaction of the EU could mean very hefty fines for being in ‘infraction’ of the EU Directive on ‘Nitrates’.

The Ex-Ante Appraisal of the NI Structural Funds Plan 2000-2006 noted that the aim to “improve the quality of agricultural produce and agricultural efficiency might be expected to encourage intensification and have negative environmental impacts.

Although differences in opinion were encountered, potentially important areas of effect of ‘europeanisation’ have been the introduction of a more systematic programmatic approach, more rigorous systems of monitoring and appraisal, greater consultation and local level involvement.

In the 1994-99 programme, the interim evaluation identified procedural weaknesses and low levels of integration between some of the some programmes – notably ‘Development.

7 GOVERNANCE ISSUES

7.1 COMMUNITY PROGRAMME MANAGEMENT

Northern Ireland has a devolved administrative structure of considerable size and sophistication given the size of the region’s population. Spend levels are agreed between government departments including shares from the main Structural Fund programmes.

Some of the Programmes supported by the Structural Funds have dispersed responsibility for programme delivery. The creation of ‘locally sensitive delivery’ mechanisms (District Partnerships under PEACE I, replaced by Local Strategy Partnerships under PEACE II) were suggested to have increased strategic economic development planning capacity at the local level, as well as help embed the peace process within and between communities and also promote inclusive policies targeting the disadvantaged and marginalised. There is also potentially a better understanding of local need and priorities, and subsequently there has developed a better understanding of the practicalities of project formulation and management at a more local level. In some cases intermediary bodies have found it

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FINAL REPORT (ANNEX I) necessary to support the application process, and a considerable amount of support has been given to assist applicants - for example the forestry services fills in the application form on behalf of assisted farmers. A potentially negative effect of such Partnerships may be more cumbersome and expensive management systems. District Partnerships initially found it problematic to absorb the significant amounts of funding as quickly as projected, but were eventually able to commit all funds.

In order to try to improve co-ordination between policies, 10 horizontal principles have been added to the scoring system for the PEACE II programme. This has contributed significantly to an increase in the size and complexity of the application form and the number of ‘experts’ needed to appraise each project. In Northern Ireland the burden for applicants is made worse by the need to carry out a full independent economic appraisal of projects with a capital cost of over £250,000.

A fear was expressed that the increased complexity of the application process is such that small groups and small projects, without incrementally developed tacit knowledge of the process, might become increasingly excluded. In the case of PEACE II for example, there were suggested to have been fewer applications, many of which were of poor quality

A Special EU Programmes Body (SEUPB) was established which reports to Ministerial Councils in the North and South and is responsible for managing part of PEACE II and INTERREG 3a.

Some EU interventions were claimed to have shifted policy in new directions. The STAR programme was claimed to have done this for investment in telecommunications infrastructure and the PEACE programmes also appear to have broadened government strategy. It was suggested that EU funding has allowed for more experimental and innovative pilot projects to be developed, which have subsequently gone on to be ‘mainstreamed’.

There are signs also, however, that considerable effort has been made to make use of EU funds to extend / part fund planned government programmes.

7.2 CO-OPERATION AND PARTNERSHIP

The inclusion of multiple stakeholders in the local delivery of Programmes (so, for example, through the Local Strategy Partnerships under PEACE II) was suggested by the majority of interviewees to be a positive outcome from interventions made under the Community Policies.

Relationships between private, voluntary and statutory activities have been cemented and a good basis for future local area partnerships to operate effectively in the absence of EU fund may have been created. Some of the Local Strategic Partnerships developed for the PEACE II programme are already very active e.g. Tyrone –Donegal Partnership. However, different structures have been developed for different programmes. The range of participants has undoubtedly increased involvement at the local level and raised local capacity to design and deliver economic development projects and programmes, although questions remain as to what will happen to this local capacity once Community funding is withdrawn.

Whilst delivery through local partnerships was more costly in financial terms than a centralised delivery mechanism, this was suggested to be more than balanced by the benefits of increased local ‘ownership’ of Programmes. This local ownership was suggested

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FINAL REPORT (ANNEX I) to give Programmes greater credibility ‘on the ground’, and was also highlighted by a number of interviewees as instrumental in bringing together groups of people who would previously never have spoken.

At a central government level, the threat of fines from the EU for failure to meet the Environmental Directives has galvanised several government departments over the issue, not least because of the uncertainty regarding responsibility for payment of such fines.

7.3 DECENTRALISATION

The current Objective 1 Transition Programme ‘Building Sustainable Prosperity’(BSP) together with several other programmes, notably Leader II, PEACE I and PEACE II, has made considerable strides to try to decentralise project funding and delivery. Each of these programmes has developed new and separate structures to help deliver the programme at the local level.

This ‘bottom up’ approach was thought by those consulted to have helped to stimulate genuinely innovative projects to come forward. A significant level of involvement of ‘local’ people in planning and managing the delivery of local projects has been generated, creating new relationships which have both cut across Sectarian divides and brought together stakeholders from across sectors (public and private, together with community and voluntary groups).

Examples have been identified of groups networking with other groups to share experiences and good practice.

LEADER II in particular was at the forefront of creating opportunities for locally based rural development initiatives that might otherwise not occur.

A large number of grants have been allocated (some 20,000 in the case of PEACE I) which in turn has generated significant workload for dispersed delivery bodies with small staffing structures. The large number of ‘capacity building’ projects inevitably led to a minority that were suggested to have questionable long term impact. In a search for greater accountability it appears that Northern Ireland government civil servants were keen to bring a more economic focus to the PEACE II programme, and so a number of the ‘softer’ aspects of the initial programme were discontinued. There was some suggestion, however, that the number of programmes targeted at businesses (at least in areas outside Belfast) was sometimes in excess of the number of businesses available to take advantage of them.

A downside of the decentralisation of delivery has been the increased cost of administration rising from less than 5% to over 20% in the case of LEADER II, although such figures should be read alongside the often positive outcomes which have emerged from local control and delivery of programmes.

Overall strategy development remains highly centralised within government departments in Belfast.

7.4 TRANSPARENCY

With regard to the membership of District Partnerships (PEACE I), some criticisms were made regarding the transparency of the appointment system. Following this, the

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FINAL REPORT (ANNEX I) partnerships developed for PEACE I were dissolved after it was considered they underrepresented some groups. This was suggested in interviews to have been addressed under the arrangements for Local Strategy Partnerships under PEACE II.

8 CONCLUSIONS

There are limited signs of cohesion at the regional level compared with the UK and EU averages. The regional economy remains fragile with no clear signs of emerging sectoral strengths. There are also a number of anticipated ‘shocks’ that could severely threaten progress made.

The cost of meeting EU environmental regulations could present a severe burden to the Northern Ireland economy. Assuming major Structural Fund receipts are to cease in the region post 2006 then Northern Ireland farmers and other businesses could begin to have to pay for the overdue clean up. Restriction of nitrate use could reduce further the viability of a significant proportion of farms. Furthermore, all businesses could be affected by water rates and much increased waste disposal charges - changes which could dampen regional economic growth and widen sub-regional differences in GDP per capita. The introduction of water rates at a time when Northern Ireland’s ability to provide state aids is reduced could adversely affect the region’s ability to attract inward investment. The cost of meeting the EU ‘Nitrates’ Directive could run into tens or even hundreds of millions, even if ‘infraction’ fines are not issued. Compliance with land-fill and wastewater treatment Directives is also urgently required and will also require significant investment.

Agriculture provides almost 6% of employment and some 4% of GDP. CAP reforms could strongly affect large parts of the region and widen further the income gap between Belfast and the rest of the region.

Some communities remain deeply divided and the long-term cessation of violence cannot yet be guaranteed. The sectarian divide continues to face barriers to the efficient integration of labour markets. Even within the PEACE programmes some projects were claimed to have become ‘politicised’ with different sections of the community looking for their ‘share’, rather than having a clear strategy to create peace or reconciliation. There were also suggestions that co-operation between groups can occasionally be a matter of expediency in order to secure funding that might not otherwise be available. Other projects have been limited with their ambitions to attempting to raise the confidence of single identity groups, prior to any strategy to effectively engage opposing sections of the community with each other. Overall, however, the involvement of community and voluntary group stakeholders in the delivery of Programmes was felt to be a positive outcome which had been facilitated by Community Policy interventions.

Membership of the EU of both Irish and British Governments has arguably helped them to co-operate successfully in a quest for a solution to the sectarian conflict in Northern Ireland, by creating opportunities for contending parties to discuss solutions.

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9 GUIDELINES FOR COMMUNITY ACTION

Review of monitoring and project selection procedures.

Attempts by both the Regional Policy Directorate and those with responsibility to manage programmes at the regional level to improve the effectiveness of expenditure have added to bureaucracy. Suggestions were made at the local level that the type of projects that were approved had not fundamentally changed, but that the amount of bureaucracy involved in applying for and drawing down EU Structural Funds had grown enormously with each round of Structural Funding. The cost of applying for funds has become significant there is a growing issue regarding:

The exclusion of new project funders that could potentially add a new and innovative dimension to programmes

The artificial grouping of projects in order to involve different partners and to reach a size at which it was worthwhile preparing an application.

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APPENDIX

COHESION INDICATORS

Indicators obtained for Northern Ireland are listed in the table below - see attached files for detail.

Demographic Migration (inter-regional movements as % of Net inter-regional movements, 1991-2001 working age population) (no data for 2000)

Social class of working age population 1993-2000 social class I-V 2001, 2002 NS-SEC classification Population of ethnic minority groups as % of total 2001 census ethnic population only regional population Economic Regional GDP per head 1993-1998 at current basic prices (£ per head & per head index, UK = 100) Average gross weekly earnings 1990-2000, by gender R&D employment as % of the regional workforce No data Poverty & social exclusion Unemployment 1992-2002 Benefit claimants (incapacity or disablement) No data Education Educational attainment (degree/ GCSE/ no 1990-2002 (no data for 1997 & 1999) qualification) Environment Household recycling rates No data Greenhouse gas emissions No data Emissions of air pollutants (carbon monoxide; No data methane (under GHG); nitrous oxides; non- methane volatile organic compounds) Agriculture Agricultural legal units as a % of total legal units 2001 only % of GDP derived from agriculture 1990-1998 Agricultural holdings by area of crops & grass, and 2001 only by land use.

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POLICY EXPENDITURES

See Excel file

REPORTS OBTAINED

- Building Sustainable Prosperity Operating Plan

- Community Support Framework 2000-2006

- Community Support Framework Annual Implementation Report 2001

- Democratic Dialogue (1997) Continentally Challenged Securing Northern Ireland’s Place in the European Union , Report 5

- Democratic Dialogue (1998) New Order – International models for Peace and Reconciliation, Report 9

- Department of Agriculture and Rural Development Northern Ireland – Rural Development Programme Strategy 2000-2006

- The Equality Impact Assessment of BSP and Peace II

- EU INTERREG II Programme Northern Ireland/Ireland: Rural development through co-operation in cross-border areas

- Europe and Europeanisation of the Irish Question (Unpublished paper) – Elizabeth Meehan, Queen’s University, Belfast.

- Ex Ante Evaluation of the Northern Ireland Structural Funds Plan 2000-2006

- Northern Ireland Structural Funds Plan, 2000-2006

- Review of Public Administration Briefing Paper: Partnerships – Colin Knox, University of Ulster.

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Index of tables included in ANNEX II

Excel File Name Table/Chart Title agric-gdp.xls A regional comparison of the contribution of agriculture, hunting, forestry and fishing to GDP (1990-1998) [West Midlands/Scotland/Northern Ireland/UK] [Chart] agric-gdp.xls % of gross domestic product (GDP) derived from agriculture [West Midlands/Scotland/Northern Ireland/UK] [Table] agricholdings-land- Agricultural holdings: by area of crops and grass, and by use.xls land use, June 2001 [all UK regions] [Table] benefit-recipients.xls Households in receipt of benefit: by type of benefit [West Midlands/Scotland/UK] [Table] earnings.xls Average gross weekly earnings: by gender [West Midlands/Scotland/Northern Ireland/UK 1999- 2000; Highlands & Islands region 1999 only] [Table] ethnic.xls Regional distribution (%) of the minority ethnic population, April 2001 [all UK regions] [Table] ethnic.xls Distribution (%) of ethnic groups within regions, April 2001 [West Midlands/Scotland/Northern Ireland/UK] [Table] ethnic.xls Ethnic groups 2001 [Highlands & Islands councils (sub-regional) & Scotland] [Table] GDP.xls Gross domestic product (GDP) at current basic prices 1993-1998 (£ per head and per head index) [West Midlands/Scotland/Highlands & Islands/Northern Ireland/UK] [Table] migration.xls Regional comparison of net population change from internal migration (1990-2001; no data for 2000) [West Midlands/Scotland/Northern Ireland] [Chart]

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FINAL REPORT (ANNEX I) migration.xls Inter-regional movements 1991-2001 [no data for 2000] [West Midlands/Scotland/Northern Ireland] [Table] migration.xls Migration – Highlands & Islands sub-regional level, 2001 [Table] no-of-agric-units.xls Agricultural legal units as a % of total legal units, 2001 [West Midlands/Scotland/Northern Ireland/UK] [Table] qualifications.xls Educational qualifications of the workforce 1990-2002 [no data for 1997] [West Midlands/Scotland/Northern Ireland] [Table] qualifications.xls Qualifications, Highlands & Islands council area (sub- regional), 2001 [Table] social-class.xls Social class of economically active population (%) 1993- 2000 [West Midlands/Scotland/Northern Ireland/UK] [Table] social-class.xls Socio-economic classification, 2001 [Highland & Island council areas (sub-regional) and Scotland] [Table] social-class.xls Socio-economic classification by region, 2001 [West Midlands/Northern Ireland] [Table] social-class.xls Socio-economic classification as a % of workforce 2001 [West Midlands/Scotland/Northern Ireland] [Table] unemployment_rates. Unemployment rates 1992-2002 (% at Spring each year) xls [all UK regions] [Table] NI structural fund Northern Ireland Structural Fund spend spend.xls [Table] NIagric.xls Direct payments and levies included in the Aggregate Agricultural Account 1981-2002 [Table] NIagricgrants.xls Capital grants and other direct payments not included in the Aggregate Agricultural Account 1981-2002 [Table]

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