The RSA Network on EU Cohesion Policy Public and Private Resources for Regional Development in the Least-Developed, Most Deprived Micro-Regions in Hungary Judit Kalman Institute of Economics, Centre for Economic and Regional Studies Hungarian Academy of Sciences RSA WORKSHOP EU Cohesion Policy: Focus on the Territorial Dimension Lisboa, 05 e 06 de Novembro de 2015
RSA Workshop: EU Cohesion Policy: Focus on the Territorial Dimension Context - Public policy trade off: equity vs. efficiency public finances: How to allocate public funds in an efficient and effective, yet also equitable manner? (tax policy, welfare system etc.) especially under crisis and austerity, but during normal operation too development policy : often opposing goals/policy tools, used tradeoff between equity vs. efficiency (Brakman et al., 2005; Bachtler et al., 2003; Martin, 1999) mixed policy both EU and national level (infrastructure? human resource? to business? to public sector? And what other aspects of devt.?) = grants given to faster developing hubs of the economy (growth oriented, NEG ) AND/OR to lagging regions for cohesion (EUSF) see mixed EU2020 goals in the EU development policy domain
In focus: the 33 most depressed (least advanced) microregions of HU and another 14 3
Characteristics of these most disadvantaged micro-regions 33 micro-regions (NUTS IV) 10% of national population mainly rural (2/3 without a town above 10thousand people) mainly peripheral (1/2 on border, 2/3 in borderregion) mainly with large Roma population (1/3 of national Roma population) under-educated, low-skilled population Child poverty (HU: 20-30 % of children live under the 60 % of median income at national level) 4
LAMR Program an innovation in HU devt.policy complex program for 33 least advanced (most disadvantaged)microregions identified via complex poverty indicator Dedicated support framework (cc.320mn EUR) from 2009-2013 For stimulating local economy (jobs) & reducing inner social and regional inequalities via infra, human devt. (health, educ., labour market etc.) tried to develop both regulatory and operating environment in a positive direction extra funds via new mechanisms - combined from several OP s (regional, social devt., social infra, econ.devt.) Preferential treat extra points for applications from there complex innovative project packages in an iterative way, improvement of local development capacity, Incitement of collaboration among local actors, between local and central, and among different OPs (funding) 5
LAMR policy contd. Additional policies also affecting least advanced microregions: Start labour program domestic central ALMP Rural development (LEADER Program) Domestic decentralized sources YET: no real coordination between EU and national funded programs, even no true harmonization of different OPs within devt. Policy! a major governance problem
Specific Questions of this study (Part of an overall evaluation on EU funds affecting disadvantaged regions of H. ) What type and magnitude of private/public (natl. and EU) regional development resources least developed (depressed) micro-regions (NUTS3) have access to at all in Hungary? What is the spatial pattern of these three different resources (private/natl./eu)? Have the least developed MRs managed to absorb more EU funds due to the special LAMR program within Hungarian Cohesion policy interventions? 7
Our initial hypothesis under normal circumstances in any region available development policy funds are minor compared to private (business) investments or state budgetary resources only additional role can be expected of them in the development potential of a region yet in the least developed, economically depressed and poor areas the private sector is very weak, barely any investments happen, thus here we can expect development policy to have a more major role without any special targeting fund-absorption capacity (measured by per-capita EU grants allocations) is lower than average among these least-developed micro-regions due to various (project size, lack of co-financing, admin. Capacity etc.) reasons, which further aggravates their underdevelopment 8
Data a new micro-region (174) and settlement (3152) based database, represents a major new element in the literature ( formerly only county data) Connecting demographic, infrastructure, economic, financial, business accounts and grants data from several sources (hard access, tedious cleansing!) : National Development Agency EMIR database on EU funds allocations, Central Statistical Office T-Star data on socio-economics Hungarian State Treasury s Kincsinfo on local government finances aggreagated to micro-region level 9
Data/ Calculating private investment Problem: CSO of Hungary collects investment data only county-wise, not separating public and private sector! Bureau van Dijk s Amadeus international database for business financial data calculating private investment from fixed assets Investment t = fixed assets t (fixed assets t-1 - depreciation t )>0 fixed assets corrected with depreciation, AND equity ratio (equity/total assets)>= 0.25 i.e. only take positive change in fixed assets as real private investment in the given year, if the firm has enough own capital to invest (leverage) not just re-values its assets 10
Forrasok 0.1.2.3.4.5.6.7.8.9 1 Uneven distribution - Regional development resources in function of the cumulative population Források elosztása 2007-2011 S o u r c e s Public grants for local govt. Inv. EU funding Private inv. S o u r c e s Public grants for local govt. Inv. EU funding Private inv. Cumulative population (developmental ranking) 0.1.2.3.4.5.6.7.8.9 1 Cumulative Fejlettségi sorrend population szerint (developmental kummulált populáció ranking) In first 2004-06 period EU funds follow almost the population-based EU támogatások distribution EU (the támogatások Jeremie Állami beruházási támogatások Piaci beruházások diagonal ), however in the 2007-11 period (+ adding rural development resources) they are a bit more equalizing, though not as much as natl. LG grants (bump above the line= more than proportional parts go for underdeveloped quantiles) private sector investment follows opposing pattern: very low proportions in underdeveloped quantiles and a major jump in the upper 2(almost 80% in the highest (Bp.) 11
TOTAL sum of development resources by micro region quintiles (along CSO complex development indicator) 35000000 30000000 25000000 20000000 15000000 EUs támogatások (NFT, ÚMFT, EMVA) és Jeremie Önkormányzati támogatások 10000000 Piaci beruházások 5000000 0 red natl. Budget grants for LG investment are negligible Green EU funds : the amount is similar for 3.,4.,5. quintiles, but while it is half of the total in the 3rd quantile, it is just cc.1/10 in the upper, most developed quantile blue- private investment 12
Opposing devt.patterns emerge Development Resources in micro regions (NUTS3) of H. 2007-2011 EU Cohesion funds (mn HUF) (%) Private investment (mn HUF) 93-95% of private sector investment goes to more developed parts of the country (non LAMR) Given that in magnitude this resource is the largest (10x) this has serious implications for devt. (but o.k from NEG perspective! and from the overall convergence of HU to EU average) National budgetary devt. Resources are almost negligible in size, though follow a similar targeting pattern than EU funds But in per capita terms - in 33MDMs private invest is comparable to EU funds, or even EU funds are higher! (underpopulated small regions) (%) Natl.budget invest. grants (mn HUF) (%) Population (%) more developed 2783997 54,61 32026202 95,82 41278 52,28 68,3 33 LAMR 797551 15,65 260340 0,78 11471 14,53 9,8 14 other LAMR(47) 325678 6,39 203481 0,61 5183 6,56 5,4 47 other underdeveloped mr (94 LAMR)) 1190327 23,35 933231 2,79 21030 26,63 16,5 13
Per capita resources in different types of Disadvantaged Microregions 14
Opposing devt.patterns emerge Non LAMR regions and cities develop due mainly to private sector investment activity, while LAMR characterized by grantdependence 15
Per capita private investments, 2007-2011 12 545-100 047 100 047-230 619 230 619-502 044 502 044-1 039 863 1 039 863-11 575 127 11 575 127-25 333 301 1 főre jutó piaci beruházás kistérségenként 2007-2011 33 LHH Per capita public grants for local govt. investments, 2007-2011 1 főre jutó hazai önkormányzati beruházási támogatás kistérségenként 2007-2011 0-1 257 1 257-10 280 10 280-31 266 31 266-42 731 42 731-67 639 33 LHH 36 297-80 679 80 679-150 399 150 399-200 736 200 736-250 906 250 906-307 785 307 785-662 778 Per capita EU funds, 2007-2011 1 főre jutó EU támogatás kistérségenként 2007-2011 33 LHH 16
Total and per capita EU funds 2007-11 by microregions 36 297-80 679 80 679-150 399 150 399-200 736 200 736-250 906 250 906-307 785 307 785-662 778 Per 1 főre capita jutó EU támogatás EU fundings, kistérségenként 2007-2011 33 LHH 17
Conclusions Very significant disparities in economic development and economic potential of micro-regions : private investment flows mostly into more developed regions market forces strengthen reg.differentiation convergence by EU or natl. grants not possible, only smoothing Overall convergence of HU towards EU average, as well as economic recovery from crisis-hit stagnating position is served more by concentrating development resources on growth poles BUT: for the sake of reducing disparities within the country support for the lagging microregions is still important! well targeted programs of even smaller amounts can offer chances to smooth and slow down negative processes as development of such laggards is grant-dependent the highlighting /favoring of disadvantaged microregions is a useful and necessary tool However governance matters: targeting, program complexity, local planning and cooperative implementation is key >yet to be seen what is accomplished in new 2014-2020 round 18
RSA Workshop: EU Cohesion Policy: Focus on the Territorial Dimension Thank you! Comments more than welcome! judit.kalman@krtk.mta.hu