Risks and Opportunities of EU Structural Funds Utilization in Rural Areas in the Czech Republic

Challenges and risks of new regional and rural programming in the period 2007 – 2013:

case of the Czech Republic

European Week of Regions and Cities, Brussels, OPEN DAYS, 8th – 11th October 2007

Making it happen, Regions deliver Growth and Jobs

European Week of Regions and Cities, Brussels

OPEN DAYS

8th – 11thOctober 2007

Making it happen

Regions deliver Growth and Jobs

Challenges and risks of new regional and rural programming in the period 2007 – 2013:

case of the Czech Republic

Topic:Checking delivery: How the new programmes are implemented

Seminar 11E35: „Synergies between programmes and with other policies“

(11th October, 11.30 – 13.30)

Martin Pelucha, M. A.

PhD student at the University of Economics in Prague,

Faculty of Economics and Public Administration

Department of Regional Studies

IEEP - Institute for Economic and Environmental Policy

Štěpánská 45, 110 00 Prague 1, CzechRepublic

tel/fax:+420 222 230259websites:

personal email:

JEL classification:Q180, R510, R580

Abstract

Author of this paper chose to analyze the key issue of new rural development programming and its synergy with structural funds interventions during the period of 2007 – 2013 in the CzechRepublic. The paper is based on the author´s experience in the preparation of this topic in the new National Strategic Reference Framework (SF part) and new Rural Development Plan of the Czech Republic for the period 2007 – 2013 (part CAP, EAFRD).

The main goal of this paper is to analyze and present main challenges and possible risks of dual regional and rural programming implementation. The case of the CzechRepublic is very specific because of the high share of small municipalities (population size 0 – 500 involves 59 % of all municipalities with only 8 % of Czech Republic´s population). The research question is: What are the main barriers and solutions for the comprehensive development in Czech regions and cities in accordance with the presumption of Czech Republic´s strategic priorities for the years 2007 – 2013? Mentioned issues will be presented in the context of continuing EU CAP reforms and new EU structural policy framework.

Key words

rural development, EU Common Agricultural Policy, EU Cohesion Policy, structural policy

Content

Introduction

1General theoretical and practical context of the programming approach for the period 2007 - 2013

1.1General theoretical framework

1.2General practical framework

2Relation of defined conditions to Czech Republic´s present situation

2.1Possibilities of financing of similar activities

3Concluding remarks focused on the form of structural and rural development policy in the Czech Republic

3.1Learning the lessons for 2004-2006 by the cohesion policy in the Czech Republic

3.2Challenges ahead: 2007-2013

References

Annex I.: Number of operational programmes of selected EU member states

Annex II: Suggested system of 24 operational programmes for the period 2007 – 2013

Annex III: Percentual share of ROPs on the total allocation of financial resources determined for all ROPs in the framework of Convergence objective. Percentual share of resources allocated on priorities with the focus on polycentric cities development and rural development

Annex IV: Division of financial resources among operational programmes for the period 2007 – 2013

Annex V: Division of financial resources per axes of EAFRD 2007–2013, Convergence objective

Annex VI: 2007-2013 Financial perspectives for the Czech Republic

Introduction

This paper is aimed at analysing the key issue of new rural development programming and its synergy with structural funds interventions during the period of 2007 – 2013 in the CzechRepublic. The paper is based on the author´s experience of the preparation of this topic in the new National Strategic Reference Framework (SF part) and new Rural Development Plan of the Czech Republic for the period 2007 – 2013 (part CAP, EAFRD). The main goal of this paper is to analyze and present main challenges and possible risks of dual regional and rural programming implementation.

The paper consists of the following sections:

• general theoretical and practical context of the programming approach for the period 2007 – 2013;
• relation of defined conditions to Czech Republic´s present situation;
• concluding remarks focused on the form of structural and rural development policy in the CzechRepublic.

1General theoretical and practical context of the programming approach for the period 2007 - 2013

In the new programming period 2007 – 2013, the issue of the rural development is separated from the EU policy of economic and social cohesion (cohesion policy), i.e. from structural funds. In the period 2000 – 2006, the rural development was a part of cohesion policy and its aim was to strengthen the competitiveness of rural areas through the increase of attractiveness of peripheral areas and strengthening of the competitiveness of subjects workingin these areas. Reform of implementation ways of the EU sectional policies led to incorporation of the rural development (as well as the issue of the environment protection) into the Pillar 2 of the Common Agricultural Policy and to its complete separation from cohesion policy. This fact has a few dimensions of its impact. An indisputable advantage is single programming and financing of rural areas and also covering of the issue in a single institution[1]. Though it´s necessary toresearch a potential synergy between these two newly separated policies more deeply and to define real links-up to the development of these areas.

1.1General theoretical framework

Looking at the newly defined idea of the EU cohesion policy and CAP, we can make a conclusion that they are based much more onthe elements of group of the “core–periphery” theories[2]. In this context it´s necessary to say that the conception of polarized development is not new in rural development theories, it was particularly French regional scientists who had merit in its development. In the new conditions of globalization, the EU also had to adapt its policies and one of the important steps to solve the negative impacts and to strengthenthe positive oneswas setting out of so-called Lisbon strategy, its objectiveset up in 2000 was“to catch up and get ahead of the USA“ in economic-social level and performance. The strategy was argued after the accession of the new Member States in 2004and reworded to 2 objectives for the next period: support of economic growth and employment. The definition of these 2 objectives reinforced thebase for separation of rural development policy (local development and integrated solution of partial problems falling within cognizance of higher levels of territorial administration) and regional policy (strategic regional and supra-regional character of the intervention).Major attention of the synergy of theoretical approach of both policies is drawn to theprogressive polarization of economic growth (existence of the economic growth poles on one hand and to so-called Myrdal´s spread effects, i.e. induced positive effects from centres of development to their rear area and catchment zone on the other hand. These development poles were defined by Wokoun (2001) according to the rate of function in three basic areas:

• their production is of larger range than production of other businesses in their environs;
• they have negotiation abilities, i.e. abilities to persuade their environs to do something;
• they are predetermined by the character of their activities to play a leader role in the economic region.

In this context, there arise questions of exact definition of rural areas[3] and related measures focused on rural development. A strategic formation of polycentric development in the regions is one of the possibilities how to support effectively the transfer of positive effects of the developmentof small and medium townsto their rear areas and also wider impacts on peripheral rural areas which has been recently applied more in the EU. Generally, it´s a change of paradigm of rural development approach in the sense of formation of spatial and economic structuresand at the same time it´s a challenge for “core-periphery” model which focuses on spatial dichotomy where prosperous and dynamic zones contrast with geographically peripheral and laggard areas.[4] At the EU level, the core areas were defined as “European megalopolises” or also the so-called “blue banana”[5] area which is moving to the eastern EU due to its economic performance.[6] At the regional level, there are a number of definitions of polycentrism. Classical definitions are based on geomorphologic approach of polycentrism, i.e. region is composed of more than two towns which are historically and politically independent, hierarchical relations among them are weak or do not exist at all and at the same time they are situated close to each other and their function in the region is complementary. On the other hand, polycentrism should be based more on functional approach ofeconomic and political networks[7] because the spatial nearness itself can´t be asufficient requirement for polycentric urban development with positive impacts on rural areas of the regions. Although the polycentric development can be a more effective way to the harmonisation of total region potential[8] (including potential of rural areas through new countryside-city relations), there are still a few examples when this approach is not applicable. It is especially scarcely populated areas and areas with tenuous transport infrastructure. Moreover, this approach is largely dependent on a complex development based on institutional networkswhich is usually more difficult to create in farther rural areas because of the poor capacity for grouping.[9]Though, these aspects are not relevant for the Czech Republic due to deep-rooted settlement structure.[10]Then the concept of polycentric development in the context of territorial cohesion of individual regions requires following approach:[11]

• to focus the policies on the development of opportunities rather than only to solve existing problems,
• to supportthe cooperation and networking,
• to build on region´s strengths and its internal potential and to improve targeting of the policies and potential impact evaluation,
• to reflect more the issue of sustainable development including risks prevention,
• higher coherence and coordination between rural and regional policy and sectoral policies.

1.2General practical framework

In the new programming period, the CzechRepublic didn´t choose the best concept of cohesion policy implementation contrary in comparison with thepreparation of rural development policy realization. It is concerned particularly the concept of cohesion policy and its comprehension by Czech central authoritiesthat is shown in fragmentation ofintervention issues. Contrary to this situation, the EU rural development policy is going to be implemented through one rural development programme although we had a possibility to create several regional rural development programmes corresponding to NUTS II. The exceptionality of the CzechRepublic is not related to the total number of operational programmes as much as to their structure – i.e. their division into sector and regional operational programmes. Graph in the Annex I shows that the number of proposed sectoral operational programmes in the Czech Republic is very high in comparison with other EU Member States. Recently, individual Czech ministries have been fighting over the share in coordination and management of EU funds in the period 2007 – 2013. It´s related to their need to keep the influence on the political scene and a high rate of their prominence. Scheme illustrating the division of operational programmes according to the individual objectives of cohesion policy is in the Annex II.

What risks and challenges do ensue from the situation? What problems can be crucial for the implementation of cohesion and rural development policies? What are the potential synergy effects of the realization of the policies? In March 2007, new Minister for Regional Development, Jiri Cunek, who´s responsible for the realization of regional policy in the Czech Republic, tried to answer these questions in his statement to the state of negotiation of the CzechRepublic and European Commission about new architecture of cohesion policy implementation and “heritage” of the last 3 years:[12]

• it came to devaluation of policymakers and professionalsunderstanding of structural policy objectives– misunderstanding of the gist and importance of structural policy as “medium-term programming document”;
• the necessity of understanding to make a decision in a limited time period;
• level of programme documents;
• inadequate reflection and reactions to “EC attitudes” to NSRR, especially in the context of the objectives and importance of structural policy in the EU and in the Czech Republic;
• imperfectionsin the level and state of NSRF and programme documentsmanaging;
• state and level of the preparedness of realization (monitoring system, employee stability, conceptual management etc.).

According to his opinion, the above factors causeda significant hold-up in preparations of cohesion policy programme documents at the national level and in particular certain erosion of the reflexion of existing good experience from the first short period 2004 – 2006. In the NSRR document, there are mentioned some problem areas which can become a barrier and risk for the cohesion policy implementation in the period 2007 – 2013:[13]

• Parallel implementation of 2 programming periods;
• Increase in amount of allocated funds;
• Increase in the number of operational programmes;
• Emphasis of the new legislation on the control arrangements, monitoring and evaluation.

According to the above, we can define a few problem areas which will complicate a successful realization of the EU structural policy projects in the CzechRepublic. One of the most significant problems is going to be „an insufficient administrative capacity which can seriously jeopardise implementation of SF and CF. That’s why it is necessary to pay permanent and systemic attention to the reinforcement of the administrative capacity.“[14] That´s the reason why the government of the CzechRepublicadopted in July 2007 a document called“Manual of solution of administrative capacity of SF and CF resource spending for the period 2007 – 2013”. The aim of application of the document is to create a system of the management, development, stabilization and motivation of public administration employees involved in the system of using the EU resources. Main EC criticisms of the SF implementation system were following:[15]

• insufficient number of employees and their qualification,
• time-limited employment and insufficient motivation,
• work requirements corresponding to the level of supra-national financial and counselling corporations,
• frequent fluctuation, lack of profesionalization and exact employee integration.

Rural development policy in the CzechRepublic has a different position. Its speciality is that it hasn´t been regularized by a competency act and so commended directly to the competence of a public administration institution yet. In the early 1990´s the rural development policy was an integral part of individual sectoral policies that could influence rural areas (e.g. transport policy, employment and business policy etc.). In the late 1990´s, there arosea need of a more complex approach of the policy, however it wasn´t still fully respected at the governmental level. That´s why there weren´t set apart any particular “budget items”) of the national budget but only partial funds for ad hoc solution of “local problems”. On this account Ministry of Agriculture refused the responsibility for the policy and at that time new Ministry for Regional Development took over the competence in 1996. After 2000, the CzechRepublic got the possibility to receive financial means from new pre-accession programme SAPARD which was focused on the agricultural and rural development. Until 2006 the main rural policy competences were shared by two departments (Ministry for Regional Development and Ministry of Agriculture). All thecohesion policy and CAP recent changes made the Czech policy scene to reconstruct the competences and now it´s Ministry of Agriculture which is responsible for rural development policy (CAP Pillar 2). At the present it is an individual policy but it has more dimensions at the local level (e.g. support of agricultural sector revitalization and its competitiveness, agro-environmental measures, support of the entrepreneurship, rural tourism, local infrastructure, education etc.). The ministry chose an approach of the realization by only one rural development programme that will facilitate to concentrate the funds for the EU priorities in three thematic areasof the policy. Covering National strategic plan in the CzechRepublic is implemented through one Rural development programme of the CzechRepublic for the period 2007 – 2013which is valid for all Czech rural areas and will be administrated and managed at the central level. We can say that chosen approach was right because the Rural development programme document was approved by EC as the first together with the Swedish one (in May 2007).

2Relation of defined conditions to Czech Republic´s present situation

The CzechRepublic is distinguished by a very broken settlement structure with a large number of small and medium towns in the regions. Regarding the European level, only Prague can be marked as a competitive area. In the global competitiveness, our capital city is a small area adherent to a wider central European polycentric region (Prague, Bratislava, Vienna). Though, the republic itself hasbig potential and large possibilities to support a polycentric development of small and medium towns that are often geographically very close to each other.[16]Low cooperation in complex development between the towns and their rear areas still seems to be a problem.An increased cooperation rate would support not only attraction rural zones but also the most peripheral areas.The CzechRepublic is situated in the central part of Europe with a relatively high average rate of population density (about 130 inhabitants per km2). That´s why the problem of “remote” areas is not as serious in the Czech Republic as it is e.g. in Poland or Baltic countries. Nevertheless it´s possible to say that existing potential for further polycentric development has not been utilizedenough. In the frame of existing dense network of small and medium towns, it´s advisable to stimulate a development of mutualrelations which will induce a networkeffect with positive impacts on stabilization of conditions of Bohemian and Moravian rural development.

In regard of weaker position of Czech regional metropolises in comparison with comparable towns abroad, it´s necessary to aim the support at the complex development of the areas, i.e. including small and medium towns which are an important development base for attractionrural zones and also peripheral regions particularly in border and mountain areas of north-east part of the Czech Republic and Bohemian and Moravian Highland (Českomoravská vysočina). Apart from serious problems caused by an insufficient transport connection toattraction regional centres, significant development barriers and their low rate of diversification and cooperation with other micro-regionsare part of the activitiesin rural areas. For these reasons it´s necessary to support development of partnership of small and medium towns in the Czech Republic in particular by complex financing forms of chosen issues of cohesion policy and also reforming EU CAP. These activities will put the accent not only on effective implementation but also on capacity and possibilities of evaluation of realized actions.