Transcript Cross border regional innovation policies

THE OECD
TERRITORIAL REVIEW
OF UKRAINE
William Tompson
Regional Development Policy Division
Public Governance and Territorial Development Directorate
Joint EU-Ukrainian seminar
Kyiv, 10 September 2012
Aims of the review
The review aims to provide national and sub-national
policymakers and other stakeholders in Ukraine with
• a rigorous and systematic analysis of socio-economic
trends across the four counties, with particular emphasis
on entrepreneurship and innovation;
• an assessment of regional policies on policies to assist
Ukraine in developing its comparative advantages and
tapping unexploited opportunities; and
• an analysis of the multi-level governance challenges
facing Ukraine.
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Impact & use of Territorial Reviews: some
examples
Key input for the new National Strategy of
Regional Development 2010-2020
Basis for a reform of the Constitution through a law
on regional government and administration
(October 2009)
Roadmap for the 2004-2008 agenda of the newly
created Montreal Metropolitan Community
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Part I
HOW WE THINK ABOUT
REGIONAL DEVELOPMENT
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Regional contributions to aggregate growth
are highly concentrated
• A few big regional hubs are the main drivers of growth…
• …but most growth occurs outside the hubs
• The notion of an “average region” is meaningless
Contributions to
OECD-wide growth,
TL2 regions
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What does this mean for policy?
• Policy makers are right to be concerned about the performance of
the big regional hubs that are their main drivers of growth.
• An exclusive focus on the hubs neglects the potential impact on
growth of policies that helped the great mass of regions to improve
their performance.
• Analysis of the determinants of growth at regional level suggests
that the constraints on growth that confront the leading regions are
different from those confronting the rest. This points to the need for
differentiated – place-based – approaches.
• There is low-hanging fruit in the “fat tail”. Although the big drivers
of growth are mainly large urban areas, as one would expect, there
are many big urban regions that make little or no contribution to
aggregate growth.
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Agglomeration tends to be associated with higher value
added, productivity and employment…
Higher
Higher
0% GDP
50% per
100% capita…
150%
-50%
0% Productivity…
50%
100%
-50%
WARSAW
WARSAW
BUDAPEST
BUSAN
PARIS
SAN FRANCISCO
PRAGUE
WASHINGTON
MEXICO CITY
NEW YORK
HOUSTON
AUCKLAND
ATHENS
BUDAPEST
ROME
BOSTON
MINNEAPOLIS
SEATTLE
STOCKHOLM
PARIS
MILAN
ATHENS
DALLAS
PRAGUE
VIENNA
DENVER
GUADALAJARA
LOS ANGELES
HELSINKI
SAN DIEGO
ATLANTA
DETROIT
AICHI
OECD AVERAGE
SAN DIEGO
BRUSSELS
BARCELONA
CLEVELAND
OECD AVERAGE
MADRID
DUBLIN
ZURICH
ISTANBUL
FRANKFURT
PUEBLA
HANBURG
TURIN
OSAKA
PORTLAND
PORTLAND
RANDSTAD-HOLLAND
LONDON
BUSAN
MILAN
COPENHAGEN
STUTTGART
MELBOURNE
BARCELONA
PITTSBURGH
MIAMI
ST.LOUIS
PHOENIX
PHOENIX
MELBOURNE
KRAKOW
ST.LOUIS
ANKARA
FUKUOKA
VALENCIA
TAMPA BAY
MANCHESTER
LILLE
TAMPA BAY
VANCOUVER
LILLE
MONTREAL
BERLIN
LEEDS
DEAGU
NAPLES
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Higher Employment…
10.0% 20.0%
-30.0% -20.0% -10.0% 0.0%
MINNEAPOLIS
BARCELONA
BUDAPEST
KRAKOW
TURIN
VALENCIA
WASHINGTON
ZURICH
BRUSSELS
WARSAW
ST.LOUIS
SYDNEY
TAMPA BAY
PHOENIX
AICHI
LONDON
SAN DIEGO
BALTIMORE
VANCOUVER
DALLAS
PHILADELPHIA
OECD AVERAGE
LEEDS
ATHENS
MONTREAL
ANKARA
COPENHAGEN
LOS ANGELES
STUTTGART
PARIS
NEW YORK
VIENNA
HOUSTON
BIRMINGHAM
FUKUOKA
MONTERREY
OSAKA
PUEBLA
RHINE-RUHR
NAPLES
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…But not necessarily faster growth
Only 45% of metro--regions grow
faster than the national average.
Metro-regions appear to have
entered in a process of convergence.
60000
San Francisco
Initial GDP per worker in PPP
II
I
Washington
Atlanta
San Diego
Detroit
40000
Phoenix
Osaka
20000
Prague
Berlin
Dublin
Monterrey Busan
Warsaw
Budapest
Ankara
0
Istanbul
III
-3.0%
Puebla
Izmir
-2.0%
-1.0%
0.0%
1.0%
2.0%
Deagu
Naples
IV
Krakow
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Average annual growth rates in GDP per capita 1995-2005
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There is no unique path to growth…
A large number of urban regions grow faster than the average rural
region – and many rural regions grow faster than the urban average.
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It’s about activation and productivity
Labour productivity
Output
Labour
utilisation
Capital
Labour utilisation is a function
of average hours worked and
the employment rate.
Key drivers of TFP:
• Investment
• Innovation
• Skills
• Entrepreneurship
• Competition
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Total factor
productivity
Labour productivity is a
function of capital intensity and
total factor productivity.
The basic regional economic
diagnosis begins with an analysis
of each factor with reference to
relevance at the appropriate
territorial scale and the institutional
context.
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Towards sustainable, inclusive growth
Efficient
1. Activation
Inclusive
1. Health & mortality
trends
2. Productivity
Sustainable
1. Global assessment
of environmental
indicators
2. Poverty
•
•
•
•
•
Investment
Innovation
Skills
3. Barriers to education
& skills development
4. Barriers to labourmarket entry
2. Place-based
challenges:
•
Infrastructure needs
•
Greener services?
•
Green innovation
opportunities?
•
Skills for greening?
Entrepreneurship
Competition
5. Disadvantage
stemming from
service access
Looking for coherence and complementarities across policies
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Regional growth: an overview of model results
First key finding: the key growth drivers are endogenous to the region.
•
Skills appear to be critical for all types of regions.
– The proportion of the workforce with low skills appears to have a greater impact
on growth than the share with tertiary qualifications.
– This implies a critical role for regional level action: labour markets for low- to
medium-skill activities are smaller, and the low-skilled tend to be less mobile.
•
Mixed results concerning transport infrastructure raise questions about the
prominence of such investments in many regional strategies.
•
Innovation, as measured by technology-based variables, has the strongest correlation
with growth:
– The greater the level of GDP per capita in the given country, the more it matters..
– Among regions with higher than national average GDP per capita, those that are
growing above average have much higher values on innovation variables than those
that are growing below average.
Second key finding: the relative weight of different factors depends in part on
the relative level of development of the region.
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Policy complementarities matter
•
The analysis points to the potential drawbacks of isolated interventions and
“unbalanced” policy packages.
•
Improving regional performance requires a feasible strategy for addressing a
number of policy challenges in a co-ordinated fashion.
•
Such an approach should make it easier to balance different welfare goals.
Efficiency
Economic policies
Social policies
Environmental
policies
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Sustained growth
Social policies may increase
efficiency (knowledge, trust,
security)
Green economy may boost
innovation
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Equity
Economic reforms may increase
equity
Environmental sustainability
Green growth may improve
sustainability
Social cohesion
Environmentally sustainable social
policies
Social policies can enhance
inclusiveness; the poor are most hurt
by environmental degradation
Sustainable environment
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To sum up…
OECD analysis points to a few broad lessons for policy design:
• Provide infrastructure as part of an integrated regional
approach.
• Invest in human capital.
• Emphasise innovation and R&D.
• Focus on integrated regional policies.
• External finance (e.g. EC funds) works best as part of a well
designed local strategy that seeks to identify and mobilise
endogenous assets.
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Part II
THE IMPLICATIONS FOR
GOVERNANCE
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Institutions matter
The quality of institutions (I) mediates the impact of policies.
Output
I
1. Activation
Labour
utilisation
Capital
1. Health & mortality
trends
2. Productivity
Total factor
productivity
1. Global assessment
of environmental
indicators
2. Poverty
•
•
•
•
•
Investment
Innovation
Skills
3. Barriers to education
& skills development
4. Barriers to labourmarket entry
2. Place-based
challenges:
•
Infrastructure needs
•
Greener services?
•
Green innovation
opportunities?
•
Skills for greening?
Entrepreneurship
Competition
5. Disadvantage
stemming from
service access
Looking for coherence and complementarities across policies
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Implementing regional development policies:
Getting governance right
 Problems are not defined or shaped like public departments
and agencies => policy-making presents risks of gaps.
 Key question: how to integrate public authorities around the
problems, solutions and outcomes that citizens and firms
needed under budgetary constraints?
 A match between top-down and bottom-up information
and initiative is critical.
 The answer requires a diagnosis and incentives for
coordination of public administration actions in order
to achieve coherent policy-making (implementing as well as
designing future policies).
=> No one size fits-all answer.
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‘Mind the Gaps’ : a Tool for a Diagnosis
Administrative gap
“Mismatch” between functional areas and administrative boundaries => Need
for instruments for reaching “effective size”
Asymmetries of information (quantity, quality, type) between different
stakeholders, either voluntary or not => Need for instruments for revealing &
sharing information
Information gap
Policy gap
Sectoral fragmentation across ministries and agencies => Need for
mechanisms to create multidimensional/systemic approaches, and to
exercise political leadership and commitment.
Capacity gap
Insufficient scientific, technical, infrastructural capacity of local actors => Need
for instruments to build capacity
Funding gap
Unstable or insufficient revenues undermining effective implementation of
responsibilities at subnational level or for crossing policies => Need for shared
financing mechanisms
Objective gap
Different rationalities creating obstacles for adopting convergent targets =>
Need for instruments to align objectives
Accountability gap
Difficulty to ensure the transparency of practices across the different
constituencies => Need for institutional quality instruments
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A multi-level governance analysis
Inter-municipal
cooperation
Inter-ministerial
collaboration
Contracts
Experimentation
Information systems
Training
Performance
indicators
Coordination &
capacity gaps
Public officials mobility
Earmarked
grants
Public procurement
tenders and rules
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Citizen participation
Independence of
media
Independence of regulatory
authorities
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Sub-national Governance: Getting Institutions
Right
• No one-size fits all solution, but a strong case for local empowerment:
 The foregoing points to the need for differentiated development
strategies for regions. There is a need to detect and exploit existing or
potential niches for the development of new activities.
 To generate such strategies, mechanisms and incentives are needed to
address information gaps – to prompt agents to reveal knowledge.
This is likely to be local knowledge.
 In many OECD countries, the municipal/central vertical governance
gap is significant: the centre faces information gaps and the
municipalities confront capacity gaps.
 Intermediate bodies’ credibility depends on their capacity.
• The actual division of labour is key: where spillovers are likely to extend
beyond regions/localities, the case for centralisation is stronger (e.g.
primary/secondary education).
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Part III
A PRELIMINARY LOOK AT
UKRAINE
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The challenge for Ukraine
Labour productivity
Labour
utilisation
Output
Demographic trends limit any
future contribution from labour
mobilisation.
Capital
Total factor
productivity
Investment rates are low,
investment needs are huge, and
investment resources are
constrained.
Bottom line: TFP growth is the key.
Reallocation
Entrepreneurship
Human capital/skills
Competition
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Inter-regional disparities are relatively
large
Bulgaria
Hungary
Estonia
Latvia
Romania
Ukraine
Slovakia
Former Yugoslav Republic of …
Poland
Croatia
Ireland
United Kingdom
Portugal
Lithuania
Germany
Czech Republic
Belgium
France
Greece
Italy
Slovenia
Austria
Finland
Sweden
Denmark
Netherlands
0
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Inter-regional dispersion of
per capita GDP
10
20
30
40
50
23
Growth is regionally concentrated but
has become less so since the mid-2000s
Contributions to national growth by region, 2000-2004 and 2005-09
0.25
0.2
0.15
2000-2004
0.1
2004-2009
0.05
0
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There is no obvious link to regional
specialisation
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
Agricultural
Industrial
FIRE
Construction
Public Administration
Change in contribution (%) from 2000-04 to 2005-09
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Kyiv apart, there has been remarkably
little divergence in growth performance
20%
Kyiv City
Contribution to aggregate growth (%), 1997-2007
18%
16%
14%
Donetsk
12%
Dnipropetrovsk
10%
8%
Kharkiv
6%
Odesa
Zaporizhzhia
4%
2%
Sevastopol
Republic of Crimea
Ivano-Frankivsk
Volyn
Zhytomyr
0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Share of national GDP (%) , 1997
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Pre-crisis growth rates were impressive,
even in lagging regions…
30%
Kyiv
25%
Sevastopol
CAGR 2000-2007
20%
Dnipropetrovsk
Kharkiv
Chernivtsi Republic of CrimeaLuhansk
Zakarpattia
Lviv Odesa
Volyn
Kyiv Zaporizhzhia
Cherkasy
Vinnytsia
Zhytomyr
Kherson
Chenihiv
15%
Donetsk
10%
Sumy
5%
0%
0
5
10
15
20
25
30
GRP (2000, at constant 2005 prices), million UAH
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…but the contraction in 2009 was
severe.
2%
Kherson
Odesa
Kyiv
0%
-2%
Cherkasy
CAGR 2007-2009
Kharkiv
-4% Sevastopol
-6%
Dnipropetrovsk
Republic of Crimea
Lviv
Chernivtsi
Chenihiv
Kyiv
Volyn
Zakarpattia
-8%
Luhansk
-10%
Zaporizhzhia
Donetsk
-12%
-14%
0
20
40
60
80
100
120
GRP (2007 at constant 2005 prices), million UAH
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Measures of inter-regional dispersion in
wages and incomes are diverging
0.6
0.5
Dispersion index
0.4
0.3
0.2
0.1
0
2000
2001
2002
GDP
2003
2004
2005
Wage
2006
2007
2008
2009
2010
Household income
*The dispersion index is measured by the sum of the absolute differences between regional and national per inhabitant value, weighted with regional share of
population and expressed in percent of the national figure per inhabitant.
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Part of the dispersion in incomes is
accounted for by price differences
160%
150%
140%
130%
120%
110%
Wages
100%
Milk
Rice
90%
80%
70%
60%
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The main institutional and governance
challenges include…
• Weaknesses in the broader institutional and macroeconomic
environment.
• A framework for regional policy that has been both under-developed
and unstable.
• A budgetary process that has hitherto made any medium- or longterm investment particularly difficult.
• Highly centralised policy processes.
• A slow transition from a compensatory logic of regional policy to a
competitiveness logic.
• Administrative capacity challenges at sub-national level.
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Thank you for your attention
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