The Effects of EU Funding on Territorial Cohesion

Workshop Evaluations on territorial development

25th April 2013

Gábor Balás, lead evaluator

The structure of the presentation

I. Aim of the evaluationII. Territorial processesIII. The planning of territorial cohesionIV. Tools of implementation V. Allocation of fundsVI. The impacts of development funds on

territorial cohesionVII. Lessons, recommendations

I. Aim of the evaluation

Main questions:1. How the Hungarian territorial processes have

formed?2. What was the role of cohesion funds in them?3. What factors affected this impact?4. How cohesion policy could better serve

territorial cohesion?Approach: The exploration of processes and

factors from the intentions through the implementation and realization to results.

II. Territorial processes

• Detailed analysis– 2000-2011 (2000-2004, 2004-2007, 2007-2011)– Static state and dynamic processes for 26 indicators– Regional, county-level, micro-regional, municipal

• Main processes to be explained:– The traditional gaps have not changed, but:– Growing gap (centre-peripheries!)– Remarkable internal realignments/changeovers on

subregional levels, „convergence clubs” on regional level

– Only temporary convergence due to the recession

GDP/cap as the % of the country average, 2010

GDP per capita, 2010

5%

10%

15%

20%

25%

30%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

megyék és főváros (n=20)

Budapest - vidék (n=2)

régiók (n=7)

régiók KMR nélkü (n=6)

megyék (n=19)

Sigmadivegence of GDP, 2000-2010

II.1 Territorial processes - GDP and its changes

dinamikusan növekvő (4)átlagos (12)lemaradó (4)

GDP growth rate, yearly average, 2000-2010

0%

1%

2%

3%

4%

5%

6%

7%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

megyék a főváros nélkül (NUTS 3, n=19)

régiók (n=7)megyék és a főváros

(n=20)

régiók Közép-Magyarország nélkül

(n=6)

kistérségek (n=174)

52 - 55%49 - 52%46 - 49%43 - 46%41 - 43%

Employment rate (age 15-74), 2011

Hoover-index of employment rate, 2000-2010

II.2 Territorial processes – Employment rate and its changes

5. kvintilis4. kvintilis3. kvintilis2. kvintilis1. kvintilis

Employment rate (age 15-74), 2011

százalékpont

-0,5 - -0,2 (2)-0,2 - 0 (11)0 - -15 (7)

Employment rate yearly average growth rate, 2000-2010

Net migration yearly average per 1000 pop, 2000-2010

II.3 Territorial processes – Migration

-1000

-800

-600

-400

-200

0

200

400

600

800

1000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Rel

atív

ván

do

rlás

i eg

yen

leg

(fő

/szá

zeze

r la

kos)

Közép-Magyarország

Közép-Dunántúl

Nyugat-Dunántúl

Dél-Dunántúl

Észak-Magyarország

Észak-Alföld

Dél-Alföld

III. Territorial cohesion in planning

Planning within an uncertain conception framework:• We have planned among varying European

interpretations on territorial cohesion• NSRF: European convergence, internal

levelling, territorial harmony and synergy in the developments

• ROPs: regional convergence and internal levelling, usage of space

• SOPs: general principles, levelling goals, implicit sectoral goals

IV. Tools of implementationEEOP EDOP SROP SIOP ROPs

narrowing the scope of applicationsseparate calls for LAMRs infrequent moderate infrequent - infrequent

other territorial limitations - infrequent - - moderatelimitations based on certain indicators - - - - infrequent

exclusion of a certain part of the region - - - - infrequent

usage of bigger fundingregional funding intensity infrequent common - infrequent -

bigger percentages in case of LAMRs - - - infrequent moderateother territory based funding ratio, differentation - infrequent - - moderate

multivariate differentiated funding ratios infrequent - - - -scoring evaluation

in case of LAMRs/diasadvantaged sub-region moderate moderate moderate infrequent commonother territorial based scoring moderate moderate - infrequent infrequent

principle of territoriality; territorial cohesion aspects infrequent - infrequent infrequent moderatereflection of local characteristics, regional specialities - - moderate infrequent infrequent

regional cooperation - - moderate - -regional significance moderate - - - moderate

support of local, sub-regional economy - - - - infrequentFlexibility in the content of the project

more activities eligible - infrequent - - -

V.1 Patterns of fund allocation – Territorial distribution of the awarded funds

Scope of data analysis:2004-2012 period : NDP - CF/ISPA – NSRF – EAFRD Comparability – problems in territorial identification

15 small-regional case studies: settlement structures, development, east-west sections

NSRF funds: - more equated, yet - with different regional strategies- EAFRD should be considered after 2007

NDPNDP+

CF/ISPANDP+CF/ISPA

(without ARDOP)ARDOP

NHDP/NSZP

EAFRD Total

Weighted relative deviation on county level

28,3 78,4 81,0 3,3 29,3 14,7 20,3

Weighted relative deviation on the level of subregions 63,9 63,9 78,4 107,1 42,8 90,4 34,7

V.2 Patterns of fund allocation- Application activity and winning chances

In the competition the local capacity (activity in applications) is the decisive factor

V.3 Patterns of fund allocation– Payments between 2007-12

Together with the EAFRD there is an equating effort, but- a grey zone of the developments appeared- does the fund make its impacts where it is received?

V.4 Allocation of funds - bottom view from the fields

• It is not always the amount of money which results in contentedness – not the quantity matters, but the kind of the fund– the conception and the perception often differs:

• in the east, where expectations were too much and• where the horizontal links were weak.

• Succesful subregions have sufficient capacity to apply, and already better institutional capacities

• Those who performed below average, there was no determinative actor

• The popularity of the funds is due to their accessibility, how they match local demands and their administrative burden– The most popular are the former national funds –because

conditions could be changed, the least popular is the LEADER because of its complicated administration

VI. The impact of development funds on territorial cohesion

• Goal: define the impacts also considering the spillovers and their break-up by the type of funds

• Spatial econometric analysis with strong assumptions. Focus:– the impacts of spending – until 2010– on the level of smallregions, – to development inequalities with three variables (income, employment, migration)

• Analysis in four steps:– Build a basic model– Integrate funding variables in it, question: which territorial unit’s variables were

impacted by the funds– Robustness analysis – which funds are effective for certain– at last: has it increased or decreased cohesion

• About the limitations of the interpretation– Because of the problems of control groups and data we only interpret the very

robust results– our results end where they become the most interesting (2010!)

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

partial model

aggregated model

robust model

Development of the communal infrstructure X X XDevelopment of communal infrastructure of enterprises

XDevelopment of public services XSupport of R+D and higher education XSupports for enterprises X X XIncreasing employment X XTraining of those who are active X X XSubsidized loans

Land based subsidies X X X

VI.2 Impacts on territorial cohesion- Income (municipal economic power) - 2

The effects are only significant locally

VI.3 Impacts on territorial cohesion- Income (municipal economic power) - 3

Growth rate of TGE per capita és and TGE per capita in the

previous period

The counterfactual per capita TGE growth rate and TGE per capita in the previous period

Are the cohesion increased or

decreased due to the subsidies?Year correlation

coefficientp-value* correlation

coefficientp-value*

2004 -0.2152 0.0043 -0.1720 0.0232 increased2005 0.0420 0.5824 0.4348 0.0000 increased2006 -0.2432 0.0012 -0.1154 0.1296 increased2007 -0.1951 0.0099 -0.1924 0.0110 have not changed2008 -0.5170 0.0000 -0.3318 0.0000 increased2009 -0.2535 0.0007 0.0920 0.2270 increased2010 -0.1464 0.0539 -0.0049 0.9489 increased

Development funds decrease the income inequalities

Change in income due to the funds (MEP) change 2004-2010, million HUF per capita

VI.4 Impacts on territorial cohesion – Income (municipal economic power ) - 4

Subregions with lower income received moreCHR, Balaton, Nógrád received lessBP is above average, but its natural dynamic growth is even more

• Spillover effects occured spatially and in time:– The employability and the R+D funds increase employment in the

negihbourhood (with 2 or 1 year delay) – The communal infrastructure for enterprises corrects locally within

2 years – The funds for enterprises and the communal infrastructure

developments worsen them with a 2 year delay, but in the neighbouring regions:

VI.5 Impacts on territorial cohesion– employment

- It improved cohesion except in 2007 and 2008

• Impacts are local, yet very heterogenous (in two directions)– Funds for enterprises:

• usually worsen them, but funds for turism improve them (EDOP overweight)

• Heterogenous by ageing and unemployment– Improving employability:

• on average, migration has positive impacts, but• impacts are heterogenous by job supply and unemployment(-2,15-3,96)

VI.6 Impacts on territorial cohesion– migration

-Training of actives: -on average it improves (3,06), but-by unemployment it is heterogenous (-2,48 – 7,00)

-The effects on cohesion vary:-In the south and in Nógrád county it had a positive effect -In the east it had negative effects

• Experimental model for TGE– With assymetric adjacency matrix (gravity model) –

Budapest is adjacent to every regionone– Matching of the model improved slightly

• Results for further consideration:– Most of the effects come from the CHR, but these effects

make an impact in the CHR

VI.7 Impacts on territorial cohesion – The spillover effects of CHR developments

– The effects occuring in small-regions outside CHR come from CHR, therefore

Funds allocated to CHR are important to every micro-region, but they increase

inequality.

• Funds considered as the most important for development:– Increasing touristic appeal, developments in education, city center

developments (and subregion specific developments) – Funds considered insufficient or missing in areas of:

• job creation, development of enterprises• development funding: intermittent or failed to implement• local infrastructural developments

• Developments considered successful: – where the developments have been built on each other– if a project was realized in a cooperation

• The successful small-regions had – sufficient capacity for development– their institutional system rather improved due to the developments– they have felt their development planned– they held their good institutional system as the reason of success

• There was no agreement between the actors on the unsuccessful ones

VI.8 Impacts on territorial cohesion– Case studies - 1

• Unsuccessful small-regions: complained of the complete lack of internal coordination (both vertically and horizontally)

• In the small-regions unsuccessful in developments:– The internal inequalities stagnated– Lack of a definitive institutional actor in development– The vertical coordination of the development was weak

• The funds have not restructured the internal balance of power• Factors of succes: small-regional differences

– in larger cities: the capacities of the cities– in mid-size towns: the deal of the competing actors – in small towns and villages: success is due to the existence of

an institutional actor who coordinates the development (development center)

– The development policy increased the capacities of the LAMR33, in other LAMRs the institutional capacities retrograded

VI.9 Impacts on territorial cohesion – Case studies - 2

VII.1 Lessons learned – The impacts can be increased with synergies

This large sum of money has its impacts, yet it would be possible to improve it by synergies

BUT• …currently the demand for coordination is too large due to

the: – the limitations– the schedule of the funds, and

• The coordination is unsuccessful– in the management of funds– between the goals of sectors and the demand of locals– between the local actors

• Because:– Cooperation is not the nature of the Hungarian culture– locally due to the lack of competition and predictability– in the center due to the division of responsibilities– between levels due to the incorrectly applied techniques

A strong institutional actor is a possible, yet fragile solution:• They had success where the actor which embrace the whole

sub-region were– in case of large and mid-size cities the central city– the sub-regional work institution or a large enterprise

elsewhere• Also the calls for applications could only build on each other at

these places– there is also almost no example for vertical coordination,

this cannot be obliged– Project owners are building further their previous

developments, yet the applications based on startegies are much more rare

– If more than one actors developments should be synchronized, it is only possible if you have a strong actor

• However: the developments with one actor became more vulnerable (e.g. Pécs)

VII.2 Lessons learned – One solution is a strong player

VII.3 Lessons learned–Can cooperations be established?

• The possibility for cooperations developed the institutional system (LAMR), yet the obligation for cooperations have not facilitated it (obligatory consortiums)

• The institutions formed in development policy– either integrated into the local instituitons– or will be deceased after the projects

• The cooperations formed in the NDP has retrograded, except for the LAR programme

• In the NSRF those projects integrated the sub-regions, which were carried out by an intitution which already had an integrated goal

• there were not a lot of these– the actors competed with each others more times, than at the

number of times they could win together• If there were incentives, jointly obtainable fund, then there were

cooperation• The planning not encouraged cooperation, yet it was a good indicator

of local cooperation

Therefore: Cooperations can be established by joint interests, not by force only

• We should decrease necessities for cooperation• We should strengthen the capacities which are able to

coordinate • We should facilitate the local cooperations with economic

incentives

• Starting points:– The territorial public administration brings new, strong

actors– The systems build on vertical coordination are successful on

their own, if we do not obstruct them– The horizontal coordination is only possible along interests

• Concrete steps:– The support of capacity building for the old and new actors

whom have interest in territorial integration;– Creation of sectorial problem maps, based on which the

public services could be financed on a per capita basis (predictably) instead of competition

VIII.1. Recommendations to increase synergy

– Support of new phases of projects which are considered to be successful;

– Calls for smaller projects, and development consultancy for the institutions with weaker capacities

– Per capita based development fund allocation in a 7 year framework for the non-compulsory municipal public services

– Development of strong territorial institution system in development policy on the basis of already existing capacities with a county-level coordination adjusted for the new territorial public administration system

– Increasing the interoperability of the funds– Direct state coordinated development in special cases– Greater funding intensity for the projects realized in

cooperations– in a limited allocation institutional calls for applications to

encourage innovation in cooperation

VIII.2. Recommendations to increase synergy

Thank you for your attention!

balasgabor@hetfa.hu