Regional development and structural funds>

Last update: 25 05 2010

  • Print version

Cohesion policy in Visegrad

Will the regions of Czech Republic, Hungary, Poland and Slovakia be able to take the full advantage of the major part of the EU cohesion funds still to be used in the current programming period? What are the main challenges and problems?


Background 

Cohesion policy was enshrined in the Treaties with the Single Act in 1986- right after the entry of Spain and Portugal to the European union. The aim was to put in place a mechanism that would reduce the development gap among regions. Its importance grew in time and in year 2004, when many transition countries entered the EU, the reduction of disparities became even more essential.

The differences between the regional development of V4 countries and that of the „old“ European union members were significant. After long years under the soviet rule, Czech Republic, Hungary, Poland and Slovakia could not compare with its western counterparts.

It was therefore decided that the countries will get financial support from the EU pre-accession funds (Phare, Ispa and Sapard). The main goal was to modernize the infrastructure and to prepare the countries for the Structural Funds. Those were made available in 2004 after the countries of V4 obtained a full membership in the European Union. The EU funds were to be spend within shortened programming period 2004-2006.

In the next programming period 2007- 2013, the Visegrad countries got a lion share of cohesion funds. All four states were granted around 140 billion euro, with Poland getting 67 billion euro, Hungary 34,5 billion euro, Czech Republic 26,7 billion euro and Slovakia 11,4 billion euro.

Though the funds were envisaged to get along with the Lisbon strategy and its goals, the V4 countries needed to address more urgent matters first before trying to get themeselves closer to „becoming a knowledge based economy“. The main problems to be solved with the help of the EU money were the lack of infrastructure, regional disparity within countries and social issues like rising unemployment.

In all four countries remains a huge gap between the region of the capital city and the other regions. All capital cities exept for Poland have their GDP per capita higher than 100 per cent of the EU average, with Prague ranking 5th richest region in the European Union and Bratislava 12th in 2007.

Though the EU funds helped to improve the situation and narrow the gap, the differences remain.

CZECH REPUBLIC

Czech Republic is the net recepient of the EU money. As far as the budget for regional policy is concerned, country is eligible to support of 26.7 bil euros in the current programming period 2007-2013.

Like in many Central and Eastern European countries, vast majority of EU money supports infrastructure projects such as roads, railways, water supply network, public sewer, but also recovery of old industrial locations including brownfield regeneration. But a support of entrepreneurship, tourism, research infrastructure, or investment into the human resources also belongs among priorities.

With the single exception of Prague, whose economic performance is well above the European average, every other Czech region is eligible for EU funding under Objective 1. Czech regions are neither extremely poor nor very rich but the disparities in terms of their performance are generally much lower than in many other European countries. According to the official data, Czech regions are somewhere between 60% and 75% GDP per capita (adjusted by PPS) with Střední Čechy (Central-Bohemia) and Jihozápad (South-West) among the relatively richest and Severovýchod (North-East) and Severozápad (North-West) among the poorest.

Both Severovýchod and Severozápad are facing difficulties stemming from the structural changes in the economy during the last 20 years. Both regions, whose performance was based on industrial production (such as mining, machinery, or textile) during the communist era, have witnessed slump in production, closures and raising unemployment during 1990s.

At the time of the economic crisis, the main priority for the Ministry for Regional Development which is responsible for coordination of EU's regional money, is to make the system more efficient and speed up the drawing. Since June 2010, Ministry has made a huge effort to eliminate unnecessary administrative burden that both applicants and managing authorities must face when dealing with EU money. It also organised regular meetings with managing authorities in order to identify potential obstacles that prevent funds from being used more easily but also to share the best practices. Almost a year after the government took the initiative, it seems that money are flowing to the recepients more easily and are potentially able to help the economy.

The related issue which is now to be dealt with by government officials is the actual efficiency of spending – i.e. to ensure that the projects that are supported are meaningful and are leading to promised goals. What will be the result of these efforts remains to be seen. In any case, the preliminary conclusions should be ready towards the end of the year.

In the current discussion on future cohesion policy after 2013, Czech Republic believes there should be no major changes as to the structure of the policy and it pushes for keeping its main goal – to support underdeveloped regions and countries within the EU. This comes as no surprise as, according to the government 'Framework position' agreed in October 2010, none of the Czech regions should cross the 75% eligibility threshold in years that would be decisive for future programming period.

As far as other possible goals for a new Cohesion policy are concerned, such as using cohesion policy to tackle 'new challenges' such as climate change, global competition, migration, or demographic changes, but also interlinking the whole policy with Europe 2020 strategy, Czech government stresses that the policy may support also these goals, but the main goal must remain the same: enhancing economic and social cohesion. Richer regions, government says, should have its own resources to address future challenges – Europe should help only the poorest regions.

Yet, as some of the government officials indicate, there may be some shift in the national position towards a greater openess to the proposals on larger role for other than current priorities in the future cohesion policy. But such a shift won't be visible before Autumn 2010 when an update of national position is expected.

HUNGARY

According to the National Development Agency (NFÜ) report, Hungarian regional development policy was not able to produce substantial results regarding regional cohesion.

„Parallell with the change to market economic in Hungary, serious differences have emerged among the regions. In spite of the efforts of regional development policies in the previous one and a half decades, the gaps did not decrease,“ reads the report for European Commission.

The paper states that the differences in territorial cohesion emerge at five different levels:

  • between Budapest and the countryside,
  • at regional level between the developed North-Western and the underdeveloped South Transdanubian and East-Hungarian region
  • at the level of small areas, where differences are defined by the combination of the industry, agriculture and services and the geographical capacities,
  • at the community level between cities and agglomerations,
  • between the border-regions and the inner regions.

The over-development of the capital is one of the main problems of regional development policies in Hungary, like it is in all of the Visegrad countries. Budapest is the only part of Hungary of which the GDP excesses the 75% of the EU average.

In fact the development of the capital also pulls up the average GDP of the Central Hungary region, which consists of County Pest and the capital. Three million from the ten million population of Hungary live in this central part which gives 7,4 % of  its territory and 45 % of the national GDP.

However, the contrast between the county and the capital is huge. The latter, for example, has three disadvantaged small areas receiving compensatory funds.

The least developed region of Hungary is the region of South Transdanubia, which has Gross Domestic Product (GDP) per capita of 42.9 per cent of the EU average and an employment rate of 52.3 per cent (2004). However it receives only half of the amount of EU funding as does the well developed Central Hungary. The same is true for North Hungary, with a bit less of a difference. The Operational Programme for the region of North Hungary amounts around €1.063 billion for the 2007-13 period, in contrast to the 1.726 billions for Central Hungary. However, the latter falls within the Regional Competitiveness and Employment Objective framework and the former to the Convergence Objective.

While Hungary receives 25,3 billion euros from the structural funds between 2007 and 2013,  the study of Eötvös Lóránd University in Budapest claims that the spending is lacking in transparency, which causes numerous problems and makes implementation a difficult process.

„The distribution system of European Union subsidies is working within the structures of an isolated, gigantic organisation, but it cannot completely secure the implementation of directives, nor the transparency of the distribution of resources,'' the study states.

The flow of information was also criticised. „Information available on the Internet could be complemented with information received directly from the National Development Agency, the managing authorities or the intermediate bodies. Our experiences show, however, that that these are non-existent channels that bring no results,'' the study concludes.

POLAND

Poland seems to break records in the spending of European funds. Polish Ministry of Territorial Development expects that Poland will be able to spend and settle accounts for 13 milliards euro in 2011. It’s an astonishing result, if we compare it with Spain in the record-breaking year 2007, when Madrid spent 6, 3 billion euro. Poland, again according to the information of the Ministry, is now “number one” country, just after Germany, in spending available funds from the EU. But it doesn’t mean that Poland is a frontrunner in regional development. On the contrary - the amount of allocated funds shows how big the needs in the Polish regions are.

A village-mayor of Mysłakowice in Lower Silesia, says that the farmers “cook, embroider and dance to the rhythm of donations from the EU”. The village funded from the European funds 20 km of sewage and water supply system, a new concert hall, tennis court and computers for the school. Lower Silesia is the third most successful recipient of the funds – 3,17 billion in the years 2004-2009. The first place goes to Upper Silesia with 6,5 milliards euro, second is Mazovia – 6,45 billion euro, and forth is the voivodship Greater Poland (Wielkopolska) – 3 billion euro.

The biggest problem in Polish regional policy is the inequality between rich industrial and poor rural regions – as wealthy can be regarded those mentioned above, with still growing cities, which have big human and economic potential like Warsaw (Mazovia), Katowice (Upper Silesia), Wrocław (Lower Silesia) and Poznań (Greater Poland). On the contrary Varmia and Masuria (Warmia i Mazury), Podlachia (Podlasie), Lubelskie or Podkarpacie are least developed regions. All situated in eastern part of Poland are called “Eastern Wall”. The amount of EU funds approved for Podlachia is only 1,2 billion euro, which is the lowest rate among all Polish regions. These are mainly agricultural areas, without big industry or larger cities.

However in Eastern Poland you can find some of the most beautiful national parks with wild nature, unique in whole Europe, untouched by the human hand like the virgin forest of Białowieża, sometimes called “green lungs of Europe”.

“Eastern Wall” could be also perfect touristic destination, but one of main problems of Poland is the insufficient transport infrastructure – possible area of the use of European funds. Bad roads in Poland are, after the health care, probably the biggest source of frustration of the citizens in the country. Despite the effort and the funds, vast differences between rich central regions and the poor Eastern part still prevail in Poland. As a tourist for example you will probably not be able to send an e-mail from a village in Eastern Poland. A weak side of the Polish regional policy is not taking the advantage of the EU funds for the development of the telecommunication infrastructure. Despite the new Operative Programme “Development of Eastern Poland” includes as one of its priorities improvement of telecommunications, the statistics shows Poland has spent only very small portion from 1,3 milliard euro from the EU fund in the field of telecommunications.  

SLOVAKIA

For the programmming period of 2007-2013, Slovakia received the highest amount of funds to-date. The government decided to divide the whole financial package of 11,4 billion into 11 operational programmes (OP) - among them Employment and social inclusion, Regional OP, Transportation, Health care, Science and research, Education and Information Society. However, the European Commission´s evaluation report showed that the country´s spending of the EU funds in 2010 is only 18,6 per cent- making Slovakia the third worst performing EU member state after Romania and Greece in this area.

One of the main problems with the EU funds are corruption and bureaucracy. „Certain politicians and enterpreneurs made a business out of the EU funds and they care more about getting the orders for themselves and for their friends than to make them serve their basic purpose- balancing the regional disparities and improving the economic performance,“ says Ivan Kuhn from the Conservative Institute of M.R. Stefanik. European Commission started inquiries in several cases.

Another problem is the red tape. Because of that, some cities and small villages feel discouraged and hesitate to apply for the EU money.

Though the situation has improved significantly, there is still a huge gap between the regions, and especially between the capital city and the rest of Slovakia.

The country is divided into four reigions (NUTS-2)- Bratislava region (the capital city and neighbouring cities), Western Slovakia, Central Slovakia and Eastern Slovakia. While Bratislava region is with 39900 GDP per capita the 12th richest region in the EU, Western Slovakia has the GDP per capita of 16500, followed by Central Slovakia with 13300 and Eastern Slovakia with 11500.

The main reasons behind are geography, history and infrastructure. „The region of Bratislava had in last 15 years mainly due to its geographical position, variety of economic activities and high concetration of experts and researchers much better starting position than the rest of the country. Therefore the differences between the capital city and the rest of the country rather grew. Slovak regions seem to somehow rely on the „salvation from heaven“ and are not using their own potential enough,“ said ecologist Ingrid Belcakova for the ASB magazine. Another problem would be the orientation of quantity of projects, rather than on quality. Many of the documents approved are not sustainable and the end of funding also means the end of the project- therefore their impact is not high. 

The priorities of future regional policy remain due to slow improvement almost unchanged- mostly narrowing the gap between regions, improving the infrastructure and fighting unemployment. There is also a political will to enhance the cooperation with neigbouring country- mainly through the Danube strategy- and to comply with the targets of EU 2020 strategy.