Regional development in the member states through EU’s assistance

Reducing disparities in socio-economic development among the EU states and regions is an important issue in European integration. Therefore, the EU regional strategies form a vital part in the national recovery and resilience plans through the use of numerous funds supporting regional growth patterns. However, most often the local authorities do not have adequate information on the EU efforts aimed at recovery and resilience in regional development. 

In order to figure out European regional and cohesion policies, it is vital to analyse first, the Union’s budget (which providing main financial instrument for the member states’ regional development, as well as so-called “less developed regions” in EU; second, to see a cardinal role of numerous European funds aimed at regional development, as the EU’s regional strategy is mainly aimed at strengthening economic, social and territorial cohesion by reducing disparities in the level of development among regions and among the EU member states (funds are numerous and quite effective in assisting regional development, e.g. ESF, ERDF and CF.
Presently, most promising directions in the regional development are supported and concentrated on innovations and research; here, the role of the national governments, science communities and national research institutions, etc. is becoming important in assembling all national science and research activities in increasing national/regional competitiveness.
Besides, it needs to see the inherent connections of regional issues with the national development models and that of European and global competitiveness: the fact that some EU states and regions are not competitive on the European and global levels makes it important for national growth strategies to formulate right priorities in regional and local development following the EU’s strategies and growth agenda.

The EU support for regional growth priorities
Attention to regional issues is taking place at the right time: reducing disparities in socio-economic development among regions in the EU is becoming more and more important. Besides, the regional strategies are vital parts in the national development plans while Union’s attention to regional issues in the member states is supported by different funds. However, local authorities in the member states (and in Latvia, in particular) do not have adequate information on the EU’s efforts to assist regional development; with this in mind, as early as in September 2013 Latvian business community, academia and regional authorities organized a “regional day” in order to concentrate entrepreneurs to EU funds’ options.
In the EU annual budget of about €160 bln, the funds for the European integration efforts are divided in the following way (in bln €): for regional development – about 50 bln; for agriculture, rural development and farmer’s support – 42 bln; for the broad sector of R&D, education, TEN-T and support for SMEs – about 26 bln; for “EU in the world” and external trade – 15, 8 bln; for the environment protection & fisheries – 15,5 bln; for border control, criminal assistance and legal issues – 3,6 bln; and for EU’s administration – 4,5 bln.
In the previous EU Multi-Year Financial Programming for 2014-20, the funds were also divided among contributors’ and recipient states. As a rule, there are a few net contributors (5-6 member states) and a number of recipients – 6-7 major member states. Five EU states –Germany, France, the UK, the Netherlands and Finland (as in previous budget cycle 2007-13 + Italy) represent about 60 per cent of the EU financing and 2/3 of the net budget balances.
Among largest contributors (on a yearly basis, in € bln), during this period were: Germany with about 20% of budgetary funding, France with about 17%, Italy, the UK and the Netherlands – about 5 % each and Finland with 1,6%.
Among the recipient states have been (in bln €): Portugal – 3,1; Belgium – 3,5; Spain -3,7; Hungary – 4,5; Greece – 4,8 and Poland -11,2; all three Baltic States are permanent “recipients”.
Developmental priorities for the 2014-2020 budget period were divided according to the following priorities (in %): Cohesion: from 37 to 33,9; Agriculture & fisheries: from 27 to 28,9; thus, CAP received a total of € 361,5 bln over 7 years which makes it more than € 50 bln per year; by 2020 the CAP budget represented about 1/3 of the EU total budget. Competitiveness allocations increased from 11 to 13,1%; rural development and environment – from 10 to 9,9%; the EU as a global player – from 7 to 6,1; Administration: from 6 to 6,4; and Security and citizenship: from 2 to 1,6. (1)
For example, Latvian position in the EU financial structures is the following: Latvia’s yearly contribution to the EU budget is about €320-350 mln (about one percent of GDP); at the same time through various funds and supports, it gets back yearly around one billion euro; it is estimated that Latvia is getting about has got €4-5 bln during a long-term period.
These amounts are distributed among the following directions (in %): Infrastructure development (roads, tourism, nature & environment protection, culture and energy – 38,4%; Human resources (education, training, health, social security) – 32, 5 %; Structural reforms, competitiveness, innovations – 29,0 %. Thus, most promising directions in the regional development have been concentrated on innovations and research. (2)

Funds and projects in the EU regional policy
Main purpose of the EU regional policy is to strengthen economic, social and territorial cohesion by reducing disparities in the level of development among regions and the EU member states.
Therefore, any project from the regions must show intentions and local investments (not only potential) into promotion of local competitiveness of regional economies to catch-up with more prosperous regions (hence, recommended cooperation with one of such regions).
From cohesion funds two main development directions are financed: transport and environment; this is for the member states which GDP is less than 75-90% of the EU average (all Baltic States are within these limits).
Existing three EU funds (they are called presently “European Structural and Investment Funds, ESIF”) are corresponding to three European objectives: – convergence is covered by all 3 funds: a) ERDF, b) ESF, and c) Cohesion Fund, CF; – regional competitiveness and employment, by two funds: a) ERDF, and b) ESF; and – European territorial cooperation – by one fund – ERDF. Generally, the European Cohesion Fund supports mainly transport, infrastructure and environment sectors with about €50 bln each year.
There are the following key components in the EU regional policy: among 3 main EU regional funds (EBRD, ESF and Cohesion) the objectives are distributed among 3 directions: 1. Convergence; 2. Regional competitiveness & employment, and 3. European territorial cooperation.
These funding help, for example, to improve transport and internet links to remote regions, boost small and medium-sized enterprises in disadvantaged areas, invest in a cleaner environment and improve education and skills. EU funding is also invested in innovation, developing new products and production methods, energy efficiency and tackling climate change.
There are the following EU institutions and bodies involved in the formulations and implementation of regional policy issues:
= in the European Parliament: Committee on Regional Development, REGI; website: http://www.europarl.europa.eu/regio;
= in the Committee of the Regions: website: http://www.cor.europa.eu ;
= in the European Economic and Social Committee (ECO section): website: www.eesc.europa.eu/sections/eco/index_en.asp; and
= in the Eurostat-regional statistics and NUTs: website: www.epp.eurostat.ec.europa.eu.
= The European Investment Bank has its own website: www.eib.org .

EU regional policy is an investment policy. It supports job creation, competitiveness, economic growth, improved quality of life and sustainable development; these investments support the delivery of the European main political objectives and development strategies. Regional policy is also the expression of the EU’s solidarity with less developed countries and regions, concentrating funds on the areas and sectors where they can make the most difference.
Regional policy aims to reduce the significant economic, social and territorial disparities that still exist between Europe’s regions. Leaving these disparities in place would undermine some of the cornerstones of the EU, including its large single market and its currency, the euro.
Regional disparities among EU-28: in most Eastern European regions these are states with 50-75% below EU’s average.
For example in the previous long-term budget (2014-20) a framework dialogue existed between the Commission and each member state on preparation of the partnership agreement and programs which finally formed the financial support from the EU Structural and Investment Funds. (3)
Every region in the EU is covered by two of three main objectives of cohesion policy: a) convergence, b) regional competitiveness and employment, and c) European territorial cooperation. However, most of the funds are targeted towards most needed, i.e. the regions with a GDP per capita under 75% of the EU average. (4)
Cohesion policy developers use the so-called NUTS system, which divides each country into the “statistical units” or NUTS regions, mostly according to population size. (5)
For example, there are 2 national/regional “operational” programs in Latvia (both are administered by the Financial Ministry: program “Entrepreneurship and Innovation” and “Infrastructure & Services”. There is as well a territorial cooperation program between Latvia and Lithuania; Latvian Ministry of Environmental Protection and Regional Development runs its own programs. (6)
On the Latvian map in the EU NUTS’ communication, one can see what kind of projects have been implemented in Latvia (e.g. 32-34 projects each in Latgale and Kurzeme, or over 35 in Riga region). (7)

Funding research projects in EU regions
In an open global economy, competitiveness relies on the capacity of businesses to create high value added goods and services. A move towards innovation-based sustainable growth is therefore at the heart of the EU’s response to globalisation.
At the center of the EU-2020 Strategy has been the support for science, research and innovation needed to create smart and sustainable growth in the states; research and innovation can also offer solutions to overcome the great challenges that face both the EU and the rest of the world, e.g. energy security, climate change, environmental degradation, the exclusion of vulnerable groups, the ageing population, global health threats, and demographic developments.
There are five key funding opportunities to support research and innovation in the states: – Research Framework Program as attached to the Horizon 2020 program (8); – Competitiveness and Innovation Framework Program; – Structural Funds and the Cohesion Fund within the Cohesion policy; – European Agricultural Fund for Rural Development and – European Fisheries Fund within the rural development and the Common Fisheries Policy.
Already in 2007 the European Commission published its ideas on “Competitive European Regions through Research and Innovation” and called on the member states and regions to make more effective use of the available funding instruments. The first edition of the Practical Guide was introduced in 2008 to provide a concise description of the main funding sources in the field of research and innovation. It explained how they can be combined in practice and provided policy makers with advice on setting up mechanisms at the national and regional levels to foster coordinated access to them.
The Competitiveness Council invited the Commission to continue progressing in this direction, notably by improving, upgrading and expanding the scope of the existing Practical Guide, including the modernisation of the guide as a comprehensive web-based portal on research and innovation.
Thus one of the recent guide’s edition for up to 2013 also includes the Lifelong learning program and international cooperation in the field of education and on LIFE + in the field of the environment. It also describes the research and innovation funding opportunities offered to countries and territories beyond the EU, in the framework of Pre-accession Assistance and within the European Neighbourhood and Partnership Instruments.
The complexity of the national structures has led to a proposal to bring together the full range of research and innovation financing instruments within a common strategic framework under the future multi-annual financial framework. With a common set of simplified rules and procedures and a single set of funding instruments, it offers the potential to make EU funding more effective and increase its impact, while making it easier to access for participants. The Common Strategic Framework for EU research and innovation funding, together with revamped structural funds in both the EU-2020 strategy and beyond. (9)

Structural Funds: guide for applicants
The management of the EU Structural Funds (SF) is decentralised: each region or the EU member state has developed (in discussion with the Commission and other authorities), one or more operational programmes. These programs are tailored to the socio-economic challenges in the state or region provided under the SF rules.
The SF’s checklist indicates that most types of applicant, research/innovation activity, etc. are covered by an operational programme that supports the particular research or innovation activity in the project.
The project manager has to check these issues with the Managing Authority in the country in charge of the programme in question.
Application procedures (e.g. ongoing applications and project selection, calls for proposals on specific topics or competitions with fixed deadlines, etc.) and types of funding (grant, service/supply contract, financial instrument) are decided by the Managing Authority for the operational program in question, depending on what is most appropriate for the activities envisaged. In addition, research or innovation projects submitted to a Structural Funds programme will be judged on their contribution to the economic development of the member state or region as well as on scientific or technological quality.
Three research and innovation spheres are supported through the EU funds: one of the latest (2020) has shown that 44% of the applicants were selected in “Physical Sciences and Engineering”, in “Life Sciences” (38%) and in “Social Sciences and Humanities” (18%).
ERC Starting Grants are awarded researchers with 2-7 years of experience since completion of PhD (or equivalent degree) and scientific track record showing great promise. Research must be conducted in a public or private research organisation (known as a Host Institution) located in one of the EU Member States or Associated Countries. Funding provided is up to a maximum of €2 million (per grant), provided over up to five years.
Due to the substantially increased competition, only 9% of applicants were successful in the latest call: grants are being awarded to researchers of 34 different nationalities hosted in 162 different institutions throughout Europe; the average age of researchers is around 34 years. However, researchers from the Baltic States have not been rally active…
Current EU’s the Horizon 2020 program with a budget of more than €70 billion over seven years is dedicated to pilot type activities in business-driven R&D, for promoting entrepreneurship and risk-taking, and for shaping demand for innovative products and services.

National/local efforts in regional policies
The EU impetus into the national/regional solutions are guided by the categories of regional perfection. These categories reflect the priorities of the EU-2020 Strategy and Growth Agenda and represent the following directions: – Smart Growth – SME Innovation: supporting the competitiveness and growth of small and medium sized business; – Sustainable Growth – Green growth and jobs through bio-economy: sustainable investments in the bio-economy sector; – Inclusive Growth – Creating jobs for the younger generation: helping to fight youth unemployment; and – CityStar – Investment projects in sustainable urban public transport: supporting the development of strategies address transport issues in our cities.
Among the three Baltic States, financial support was the following: for Latvia – € 4,6 bln, for Lithuania – €6,9 bln and for Estonia – € 3,4 bln. During previous financial period, the EU Cohesion funds were getting 35,7% of the total EU budget, or about € 347 bln: these resources were divided among 3 aims (cohesion priorities): convergence (81 %), competitiveness & employment (16%) and territorial cooperation -2,5%. (10)
The EU Strategy for the Baltic Sea Region is functioning for more than a decade. There are the following “macro-regional” directions in this strategy: = environmental sustainability (reducing sea pollution); =innovations for SMEs; =better transport connections (accessibility & attractiveness), = safety & security (improving safety and reducing accidents). (11)

For example, according to Latvian Finance Ministry’s “Growth and Employment” program, the country’s priorities include: research, technological development and innovations; increasing public awareness of the rights of EU citizens; raising small and medium-sized companies’ competitiveness; green economy: transition to development with sectors emitting less carbon dioxide; environmental protection and efficient use of natural resources; sustainable transport development; employment, labor mobility and social inclusion; education, skills and lifelong education; urban environment sector.
The program explains that the EU fund absorption strategy is based on the “Latvia 2030” program, National Reform Program and National Development Plan for 2014-2020. The only thing is to hope that such an “absorption strategy” produce some evident and positive results.
Extensive funds from the EU institutions could serve as an efficient instrument in Latvian regional/local development only in case that such assistance (of about € 5 bln in the coming seven years) is closely connected to the national development strategy. This strategy has to be based on a prospective national structural reform, in which each Latvian region has elaborated a specific plan showing its win-win solution in using local resources and work force, be it wood-processing, manufacturing or elaboration of new products or/and services.
Recent EU guidelines for regional policy are clear: EU cohesion policy assistance to the Baltic States in the coming years will be closely connected to the “European dimension”. (12)
The EU is establishing a common strategy for more coordination through a Common Strategic Framework; it will provide the basis for better coordination between the European Structural and Investment Funds (ERDF, Cohesion Fund and ESF as the three funds under Cohesion Policy, as well as the Rural Development and Fisheries funds). This also links better to other EU instruments like Horizon 2020 and the Connecting Europe Facility.
For example, European Regional Development Fund (ERDF) will be concentrated on innovation and research, the digital agenda, support for small and medium sized businesses (SMEs) and the low-carbon economy. The EU’s main message is to use European cohesion funds more efficiently.
Efficiency in this sense means both national structural strategies aimed at “value-added” future development and national innovation plans to produce new goods/service while creating new jobs. Both politicians and decision-makers have to get it right: they have to think and behave completely different if they want to have a sound development in perspective.

References
1. General link to the EU Regional policy: https://ec.europa.eu/info/eu-regional-and-urban-development_en.
2. Eiropas Savienibas Ekonomiska Politika un Latvia (I.Dovladbekova, E.Eteris, D.Zelmenis).-RSU, 2008, pp.230-231.
3. Further information on: http://ec.europa.eu/regional_policy/what/future/index_en.cfm ;
4. See: the map of regions covered by the Convergence and Regional Competitiveness and Employment objectives .
5. See: Regions covered by the Convergence objective; Regions covered by the Regional Competitiveness and Employment objective; and European Territorial Cooperation objective;
6. See: general reference for Latvian activity in EU regional funds: http://www.esfondi.lv/events.php?id=1 ;
7. See: http://www.esfondi.lv/projektudienas/; Valuable information is available in “Latvia Competitiveness Report”, Stockholm School of Economics, Riga, 2013, -207pp.
8. See additional information in “EU research program to boost innovation”:
http//www.baltic-course.com/eng2/good_for_business/?doc=82357&ins_print;
9. http://cordis.europa.eu/eu-funding-guide/home_en.html ;
10. More information on: http://ec.europa.eu/regional_policy/funds ; as well as in: https://ec.europa.eu/info/eu-regional-and-urban-development/financial-support-projects/structural-and-investment-funds_en
11. See more on: ec.europa.eu/regional_policy/cooperation; https://ec.europa.eu/regional_policy/index.cfm?action=publications.details&languageCode=en&publicationId=1556
12. http://ec.europa.eu/regional_policy/newsroom/detail.cfm?LAN=en&id=1057&lang=en .

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