SWEDEN. Ex Post Evaluation of Cohesion Policy Programmes financed by the European Regional Development Fund in Objective 1 and 2 Regions

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1 ISMERI EUROPA The Vienna Institute for International Economic Studies Ex Post Evaluation of Cohesion Policy Programmes financed by the European Regional Development Fund in Objective 1 and 2 Regions Work package 1: Coordination, analysis and synthesis Task 4: Development and achievements in Member States SWEDEN

2 TABLE OF CONTENTS PREFACE...2 EXECUTIVE SUMMARY...3 MAP OF SWEDEN OBJECTIVE 1 AND 2 REGIONS REGIONAL CHARACTERISTICS AND SOCIO-ECONOMIC CONTEXT NATIONAL MACROECONOMIC CONTEXT AND POLICY REGIONAL DEVELOPMENT POLICY AND THE CONTRIBUTION OF THE STRUCTURAL FUNDS EFFECTS OF INTERVENTION IN DIFFERENT POLICY AREAS FORMS OF INTERVENTION IN THE DIFFERENT POLICY AREAS POLICY IMPLEMENTATION GLOBAL EFFECTS ADDED VALUE OF THE EU CONTRIBUTION LESSONS FOR THE FUTURE...22 REFERENCES...24 TABLES...25 CORRESPONDENCE BETWEEN POLICY INSTRUMENTS AND FOI CATEGORIES...26 Applica-Ismeri-wiiw 1

3 PREFACE This report is intended to summarise the main aspects of regional disparities, the changes in these which occurred over the programming period and the principal features of regional development policy over this period in terms of the objectives, the way that it was implemented and the contribution of the Structural Funds. It also reviews the evidence on the effects of policy as regards both the direct results of expenditure in the different policy areas and the wider impact on development as such. It is based on three primary sources of information. The statistical data on regional and national developments over the period so far as possible come from Eurostat in order to ensure comparability with other studies carried out at EU level as well as with the other national reports produced as part of the ex post exercise. The data on the allocation of funding and expenditure come from the INFOVIEW database maintained by DG REGIO, which itself is based on regular information from the Member States on the allocation of funding and the payments made. Information on policy objectives, on the results of expenditure and the wider effects of this and on the procedures adopted as regards the implementation of policy comes from various programming documents and national evaluation reports as well as from impact studies which have been carried out on the actual or intended effects of programmes. The reports, therefore, are based on existing information or more precisely, the information available at the time they were prepared (around mid-2008) and no new evaluation has been undertaken for purposes of preparing the report. The report has been prepared by the Applica-Ismeri Europa- wiiw Consortium, which is coordinating the work on the ex post evaluation of ERDF expenditure in Objective 1 and 2 regions, working closely with a national expert who was responsible for interpreting the quantitative data and the other information indicated above. 1 Although the contents of the report have been checked with officials in DG REGIO and with the national authorities, responsibility for any errors in the factual information presented or its interpretation rests with the authors and the views expressed do not necessarily reflect those of DG REGIO or the national authorities. 1 This report was produced with the assistance of Martin Andersson, Jönköping International Business School, CESIS Applica-Ismeri-wiiw 2

4 EXECUTIVE SUMMARY During the period , two regions in northern received support under Objective 1, whereas four regions received support under Objective 2. Both sets of regions lag behind the national average on most economic indicators. In the Objective 1 regions the basic aim was to develop local industry through a knowledgebased growth strategy, such that the growth in the regions was comparable to other regions in the EU. The overall aim in Objective 2 regions was to improve the business environment and stimulate knowledge-driven development. In both Objective 1 and 2 regions, expenditure was allocated between broad priority areas in line with the stated objectives of policy. The evaluations and national reports for the regions receiving Structural Fund assistance report success in terms of core indicators relating to the number of new firms and new jobs. The extent to which these new firms and new jobs will remain after the programme has ended is unclear. Most reports and evaluations also maintain that policy had a real effect on education and the development of competences. In both Objective 1 and Objective 2 regions, several measures were taken to increase the level of human capital in the regions. These seem to have been successful in the sense that the number of people enrolled in human-capital development programmes and the like were close to or above the initial targets set. There are few examples of policy succeeding in altering the overall trends and development paths in the regions in any significant way. Though there is some indication of catching-up in Objective 1 regions in terms of GDP per head, it is difficult to find and isolate the effects of policy on the trends in aggregate measures of regional performance. The evaluations maintain that the policy measures have, however, increased the potential for altering the trends over the long term. So far as policy delivery and implementation is concerned, the evaluations suggest difficulties relating primarily to (i) the prioritizing of projects that generate long-term effects and (ii) the integration of horizontal goals, such as the environment and equality (primarily gender equality). For future programmes, an important lesson is that goals should not be set too broadly. The evaluations stress that the goals in both Objective 1 and 2 regions were ambitious and that they were formulated in such a way that it is difficult to determine the extent to which they have been met. There is often a significant discrepancy between the formulated goals and what in practice is possible to achieve given the amount of funding involved and there is a need for the intended results of Structural Fund programmes to be better defined. Applica-Ismeri-wiiw 3

5 Several reports also discuss the need to develop a better indicator system, the current indicators being considered to lead to a biased evaluation, with in several instances single policy measures accounting for a substantial part of the results achieved by whole programmes in terms of core indicators (employment and new firms created). Several programmes put a great deal of emphasis on education and the development of competences, but it is maintained in the evaluations that the current evaluation system is not capable of providing a true picture of the effects of such efforts. Another lesson is that the programmes should pay more attention to the geographical area of the programmes. Organisations best suited to cooperating with an organisation in an Objective 2 municipality may not be located in the area covered by the same programme. Applica-Ismeri-wiiw 4

6 MAP OF SWEDEN OBJECTIVE 1 AND 2 REGIONS Applica-Ismeri-wiiw 5

7 1 REGIONAL CHARACTERISTICS AND SOCIO-ECONOMIC CONTEXT 2 is divided into 8 NUTS 2 regions, (i) Stockholm, (ii) East Middle, (iii) Småland with the islands, (iv) South, (v) West, (vi) Northern Middle, (vii) Middle North (viii) Upper North. The NUTS 3 regions are made up of the 21 counties in the country. Over the period , six regions received Structural Fund assistance. Norra Norrland and Södra Skogslän in northern received support under Objective 1. Four regions Västra, Södra, Öarna, and Norra received support under Objective 2. The Swedish economy is a heterogeneous one, where typically larger city-regions grow and remote areas decline. The trend during the 1990s was that small regions became smaller in population and relative economic terms, whereas large regions became larger. In particular, regions surrounding the three major metropolitan areas in (Stockholm, Göteborg and Malmö) have shown the strongest growth, largely because of the job opportunities, consumer services, man-made amenities and producer services available. Moreover, since the beginning of the 1990s to the present time, a major share of job growth has occurred in private service sectors, primarily in knowledge-intensive business services (KIBS) which are geographically concentrated in metropolitan areas and larger city-regions. There are no signs that this trend is diminishing. Figure 1 (in the Annex) presents the employment growth in the Swedish NUTS 2 regions between 1993 and It is evident that Stockholm, West and South have had the strongest employment growth. The three northern regions experienced a decline in employment during the period. Many of the disparities as regards employment growth can be attributed to differences in the economic structure of the regions. The regions which received support under Objective 1 and 2 are lagging behind the national average on most indicators. A distinct feature of both sets of regions is that a large proportion of population live in remote areas compared to other regions in both the rest of and the EU25. In Objective 1 regions, over 70% of the population live in remote areas, while in Objective 2 regions, the figure is 63% as compared with a national average of 20% and an EU average of only 5%. Moreover, the regions receiving support also experienced a decline in population between 1995 and See Table 1: Regional disparities and trends. Applica-Ismeri-wiiw 6

8 From an EU perspective, Objective 1 and 2 regions score highly on many indicators. Compared to the EU25 average in 2006, the regions have higher levels of GDP per head in PPS terms, higher education attainment levels, higher employment rates and lower unemployment rates. However, compared with the rest of, they are lagging behind. Whereas GDP per head in in 2006 was 17% above the EU25 average, in Objective 1 regions, it was only 8% above and in Objective 2 regions, just 2% above. Between 1999 and 2006, there are indications of catching up by the Swedish Objective 1 regions. The growth rate in GDP per head (3.3% a year) exceeded the Swedish average (2.6% a year). In Objective 2 regions, the growth rate was much the same as in the rest of the country, still significantly higher than the EU average (1.8% a year). So far as education attainment levels are concerned, around 30% of the population (25-64) in as a whole had tertiary qualifications in 2006, while the corresponding figures for Objective 1 and 2 regions were lower (28% and 24% respectively), again in both cases higher than the EU average. 3 Over the programming period, there is no sign of the gap with the rest of being closed, the increase in the proportion of working-age population with tertiary education being very similar to that in the rest of the country Objective 1 regions lag behind the rest of the country in terms of R&D expenditure. In as a whole, this amounted to around 3.6% of GDP in 2005 (the latest year for which data are available), one of the highest levels in the OECD, and 3.5% of GDP in non-assisted regions. In Objective 1 regions, this figure was 3% and in Objective 2 regions 4.6%, in both cases well above the EU average (around 2% of GDP). 2 NATIONAL MACROECONOMIC CONTEXT AND POLICY 4 Over the period , the growth rate of GDP in was higher than the EU average. With the exception of the period (when was hit hard by the dot.com crisis and had a slower growth than in the rest of the EU25 as a whole), GDP growth exceeded the EU average by over 0.5 of a percentage point, which was also the case in the preceding 5 years. At the same time, inflation was consistently lower than the EU average, at under 2% a year throughout the programming period. is a small open economy which is highly dependent on exports, which, along with imports amount to over 90% of GDP. The balance of trade was in increasing surplus over the period and net exports contributed significantly to growth. The public sector balance was 3 The average for EU25 in the same year was about 23%. 4 See Table 2: Macroeconomic developments Applica-Ismeri-wiiw 7

9 transformed from a large deficit in 1995 to a surplus in 1999, which increased slightly further over the programming period. As a consequence, public sector consolidated debt was reduced considerably to under 60% of GDP at the start of the programming period to only 46% by the end (and to just 38% of GDP by 2008). Improving the public sector balance and reducing debt has been a deliberate policy since the deep recession in at the beginning of the 1990s. Fiscal consolidation, however, occurred largely before 2000 and public expenditure between 1995 and 1999 was reduced markedly (from 66% of GDP to 59%). In the first two years of the programming period, it was reduced further, but from 2001 to 2006, it declined only slightly relative to GDP, implying a significant expansion in real terms. Moreover, the share of investment in public expenditure increased over the period (from 5.2% to 5.7%). These macroeconomic indicators indicate that the underlying economic conditions during most of the programming period were relatively favourable to regional growth and that there is little sign of the finance for regional development being unduly constrained. 3 REGIONAL DEVELOPMENT POLICY AND THE CONTRIBUTION OF THE STRUCTURAL FUNDS Main objectives of regional development policy over the period As emphasised by the evaluations, s regional development policy has gone through major changes since the mid 1960s, the most important being a shift from a policy of redistribution of income to the weaker regions towards one of growth. The focus of national policy has been increasingly on achieving sustainable development in regions. The strategies implemented by the Structural Funds reflected the needs of each of the regions assisted and the objectives set largely corresponded with local priorities. An example is the heavy emphasis on the service sector, specifically on tourism and the creation of businesses around the local cultural heritage. The overall development objectives for both Objective 1 and 2 regions, respectively, were formulated in a similar way. In the two Objective 1 regions, Norra Norrland and Södra Skogslän, the main aim of policy during was to develop local industry so as to achieve a comparable growth rate to that in other regions in the EU. The concern was to pursue a knowledge-based strategy, focusing on sectors of activity with growth potential and focusing intervention on strengthening the productive potential of both enterprises and regions through, for example, education, vocational training, R&D and the development of new business ideas. In Applica-Ismeri-wiiw 8

10 addition, priority was given to places that suffered from the disbandment of military regiments. In Norra Norrland, the programme budget was divided between coastal and inland areas, the latter being previously classified as Objective 6. In the Västra Objective 2 region, the development strategy was focused on two areas: (i) developing the business environment and the creation of new firms and (ii) strengthening the cooperation and links between the education system and industry. In addition, support was given to stimulating the development of SMEs in order to strengthen the development of municipalities in rural areas. In the Norra region, the development objectives were also much the same, policy focusing on achieving knowledge-driven development as well as strengthening the business environment. Large firms in traditional industries were regarded as the basis for local economic development, while SMEs were considered to be important in creating the conditions for employment growth and regeneration. A quarter of funding for business development was allocated to supporting new start-ups. The objective in the Södra Objective 2 region was to create an attractive environment for people to live in and reduce the decline in population, as well to develop industry and services in a sustainable way, in part through strengthening human capital. The main aim in the Öarna Objective 2 region was to increase its attractiveness and to preserve and take advantage of its specific resources. This was intended to be achieved through the active participation of the people living there, through increasing their education levels and through efforts to stimulate business activity in the region. The ultimate objectives were to limit the decline in population and to initiate a sustainable development path. Allocation of expenditure in Objective 1 regions 5 In Objective 1 regions, the largest share of public funding (39%) was directed towards the enterprise environment, with the second and third largest shares going to human resources (21%) and territorial policies (14%). National and EU sources of funding were directed to relatively similar target policy areas. A large proportion of projects in Objective 1 regions concerned the local cultural heritage. As advocated in the programming document, in Norra Norrland and Södra Skogslänsregionen, a major objective was to strengthen the trade of the Sàmi people and related businesses. A relatively large amount of expenditure, around half the total going to territorial polices, was allocated to the development of rural areas, while funding to improve the enterprise 5 See Table 3: Allocation of resources by main policy area in Objective 1 and Objective 2 regions. Applica-Ismeri-wiiw 9

11 environment went almost entirely to SMEs and the craft sector. Support for human resources was directed mostly towards education and training. The allocation of funding in Objective 1 regions, therefore, was closely in line with the stated objectives of policy, in that it was focused on strengthening business competitiveness and human capital. Allocation of expenditure in Objective 2 regions 6 In Objective 2 regions, the policy areas receiving the largest share of public funds were the enterprise environment (44%), territorial policy (22%) and transport and telecommunications (19%). Only a very small proportion of EU and national funding (0.3%) went to large businesses, which is in line with the stated objectives of policy that the focus should be on SMEs. All support within the human resources area was allocated to education and training. Financial execution 7 was allocated EUR 440 million for Objective 2 regions for the period , and EUR 780 million for Objective 1 regions. At the end of 2008, expenditure in the Objective 1 regions was 7% higher than the initial allocation and in transport and telecommunication projects, around a third higher. Apart from in agriculture and fisheries and technical assistance, where spending was 15-20% below the amount allocated, expenditure was closely in line with initial allocations in all policy areas. In Objective 2 regions, expenditure was also 7% higher than the initial budget allocated at the end of 2008, and in Örna, 32% higher than the initial allocation. Expenditure was highest in relation to the amount initially allocated in environmental and energy projects (40% above the allocation) and apart from technical assistance (17% below), almost all of the budget allocated had been spent by this time. 6 See Table 3: Allocation of resources by main policy area in Objective 1 and Objective 2 regions. 7 See Table 4: Expenditure at 2007 by policy area for a comparison between the amount of funding allocated to particular policy areas and the amount actually spent as at the end of Applica-Ismeri-wiiw 10

12 4 EFFECTS OF INTERVENTION IN DIFFERENT POLICY AREAS Agriculture and fishery Policy in this area in Objective 1 regions consisted mainly of strengthening local agriculture. According to evaluations, completed projects resulted in more new farms and employment opportunities being created in both the Objective 1 regions than the targets set initially. However, the initial targets were low. The harsh climate and large distances in Norra Norrland and Södra Skogslän tend to adversely affect competitiveness and, at the same time, require the development of economic activity which is sustainable. According to the midterm evaluation, policy effects are difficult to evaluate in Norra Norrland due in particular to the diffused targets, though it is stressed that the funds allocated to rural areas have created business opportunities. A number of measures, therefore, were aimed at directing firms in agriculture and fisheries towards ecological activities within these. The majority of business start-ups were in activities related to reindeer, while several projects were concerned with modernising fishing boats. The forestry industry is important for Södra skogslän and many projects were related to this. An example is the SÅGAB trade association which acted as a coordinator for projects for improving the market potential of the small and medium sized sawmills in the region. The result was the creation of a website bringing sellers and buyers of wood together, which has led to extensive networks being established between sawmills as well as between these and public authorities. Although the financial support provided under Objective 1 was relatively small, the results have been substantial for small firms in the industry. More new business start-ups took place in the paper and pulp industry than in any other and the number increased over the programming period. Enterprise environment The results of a number of policy interventions are difficult to isolate in terms of geographical area, while local policy initiatives are in some cases difficult to disentangle from those launched at national level 8. This is particularly the case as regards projects for providing support to SMEs and the craft sector, which represented the majority undertaken in the Objective 1 regions. 8 Oxford Research Applica-Ismeri-wiiw 11

13 It is evident that funding on projects included under enterprise development has the strongest effect on core indicators. Several reports conclude that the goals set for the number of new jobs and firms created were in general fulfilled. For instance, in the Västra region, the objective was to create 7,000 new jobs and maintain 1,000 others as well as and to establish 3,000 new firms. The results achieved, according to the 2006 Annual Report, exceeded the first two of these aims, 10,544 new jobs being created and 3,827 maintained, while 2,360 new firms were set up, slightly less than planned. Much the same was the case in the Södra region, with 2,072 firms being established, as against a target of 720 and 5,847 jobs being estimated to have been created and 3,071 maintained as against targets of 4,000 and 2,400, respectively. It is clear from the evaluations that the new jobs and firms tend primarily to originate from a small set of specific policy measures relating to regeneration of businesses and improving the business climate. In the Västra Objective 2 region, for instance, over 80% of the contribution of the programme to new job creation came from one specific policy measure. A similar experience is reported in the Norra Objective 2 region. A central element in the development strategy in Norra was to initiate activities to stimulate entrepreneurship and new business start-ups. Although start ups increased, the growth in practice was similar to what it had been before the programme was initiated. In addition, while the participation rate of men increased to over 77% and that of women to 72%, these are well below the target of an overall participation rate of 80%, which according to the evaluation documents seems to have been unrealistic. However, by the end of 2006, 190 projects for business creation had been completed, which resulted in just over 11,000 new jobs and 5,728 new firms, in both cases over five times the targets set. According to the evaluations, EU funding not only led to projects being completed, it also resulted in improved organizational skills in administrative units in the region, which in turn implies better selection and control of projects. In the Södra and Öarna regions, there was a high application rate for projects and also a high acceptance rate. The primary focus in the Öarna region was the remote places on the archipelago which is regarded as area in urgent need of support. 9 This focus meant that the majority of the funding approved was related to telecommunications and infrastructure. The rate of new firm creation in the region was above the target set though the number of jobs created was below. The target set in the Västra region was to create 3,000 new firms by stimulating entrepreneurship, in part to improve conditions in the regional labour market. The actual result fell short of this target, which may be a consequence of the diminishing size of 9 One exception is the congress hall Wisby strand which was opened in April Applica-Ismeri-wiiw 12

14 projects in the course of the programming period. What is evident is that a small number of projects were responsible for a large proportion of the start-ups. Examples include two business incubators, Ung Kraft and Näringslivscenter Norra Skaraborg. Human resources Most evaluations maintain that policy had a real effect on education and the development of competences, which is considered important in improving the conditions for business development, industry renewal and competitiveness. In both Objective 1 and Objective 2 regions, a number of measures were taken to strengthen human capital in the regions. Several evaluations claim that they have been successful in the sense that the number of people enrolled in education and training programmes was close to or above the targets set initially. In the Norra region the projects implemented for developing new and better skills more than achieved the targets set, almost 22,800 people and 1,210 firms participating in the projects concerned, well above the target (2,000 people and 500 firms). Although there were no explicit goals set for the creation of new firms and jobs, it is estimated that over 1,000 new jobs and around 240 new firms were created. According to the evaluation report for the Norra Norrland Objective 1 region, the measures taken meant that people who otherwise would not have had the opportunity were able to participate in education programmes and increase their skills and competences. Over the period, 163 projects were financed in this policy area. Examples include vocational training programmes for the construction industry, centred on wood and wood products, which are particularly important in the region. Overall, some 20,745 men and 18,744 women (many more than the target of 1,000 each set) as well as 1,812 firms (target 250) participated in the programmes in the region. In the Södra region, the results of the measures undertaken in this policy area were also better than expected, 8 new centres of learning being established in addition to distance courses being expanded. At the same time, 1,638 information activities were carried out together with 483 education programmes, in which just over 10,900 people participated. In the Öarna region, the long distances between places makes economic development difficult. The difficulty has been particularly evident in trying to establish business-related education and training. Gotland remains the only location where there is an educational establishment, which might in part explain why targets in this policy area have not been achieved. On the other hand, the Arkipelag- educational network in the archipelago project, implemented by the Gotland municipality in order to increase access to learning, has been relatively successful. Applica-Ismeri-wiiw 13

15 Transport and telecommunications As mentioned in the mid-term evaluations, the means available to evaluate measures in this policy area are inadequate in all the assisted regions. In particular, it remains unclear, whether the projects should be assessed in quantitative or qualitative terms. The ultimate aim of the investment undertaken was to improve the conditions for growth and development conditions for local industry. Several strategic projects to develop regional airports and sea ports were carried out, such as in Norra Norrland, with inter-modal transport facilities in the port of Skellefteå. One of the largest ongoing infrastructure projects investments in is the construction of the Botniabanan railway, begun in 1999, in the two Objective 1 regions, Södra skogslän and Norra Norrland. This is intended not only to provide a rail link for places across the region but also to connect with national and European main lines. In Norra Norrland, funding was allocated to projects for further analysing the effects of the Botniabanan and how to exploit the possible benefits, such as the new railway stations in Umeå Östra and Hörnefors. Another aim has been to improve and extend broadband connections in order to increase accessibility. In both Väster Norrland and Jämtlands län in the Södra skogslän region, the coverage rate of broadband connections was increased to 80% and in Östersund to 90%. In Norra Norrland, 167 applications for projects in the transport and telecommunication policy area were approved and expenditure exceeded the amount initially allocated by 5%. At the end of 2006, 126 of these projects had been completed. While new jobs were created in the IT activities, the majority of them went to men rather than women. Projects have not only focused on building regional networks. Projects such as Interaktiva institutet i Piteå- Music studios builds on the incentives to create international networks and international collaboration projects. Most of the infrastructure investment in Södra skogslän was aimed at improving the four airports and extending broadband. At the time of the mid-term evaluation, two-thirds of total investment in this policy area had been spent on airports. The mid-term evaluation warned of the low share of IT-infrastructure projects in the Öarna and the Södra regions, since infrastructure had been identified as the main target for investment. It is commented on that, just as improving transport links might increase the accessibility of remote areas and make it possible for people to commute over long distances, telecommunications and IT more generally might have a similar effect by facilitating virtual links. Applica-Ismeri-wiiw 14

16 Only a smaller number of projects were directed at investment in social and energy infrastructure, though, given the long distances, improvements in transport and telecommunications might have made existing social infrastructure more accessible. Environment and energy Much of the funding allocated to environment-related projects was aimed at encouraging people to use public transport. In addition, there was a general effort to make SMEs more aware of environmental issues and, for example, encouraging them to make more use of renewable sources of energy. Projects such as the introduction and extension of distance courses at universities and the installation of broadband to make it possible for people to work from home also contributed to reducing pressure on the environment, illustrating the way that many of the measures supported in different policy areas were interrelated and reinforced each other. In general, however, success in meeting the horizontal objectives of environmental protection, territorial integration, sustainable development and equality of opportunity seems to have been limited. The effects are however difficult to identify and evaluate at this early stage, since many of these objectives need several years to be able to be evaluated. Many of the projects initiated have been completed in the environmental policy area (75% of them, for example, in Norra Norrland), but the mid-term evaluations for all regions emphasised the difficulty of integrating these objectives into a coherent development strategy. The Öarna region is somewhat of a special case as the archipelago in the region has been a specific target for protection under Swedish environmental legislation. Special environmental programmes have been launched by the government in order to create coastal areas that people were able to live in. The Structural Funds have made it possible to finance projects that otherwise would not have been undertaken, an example being the water purification plant on the island of Koster. Territorial policy The Structural Funds supported the development of tourism in all the regions. For regions such as Norra Norrland and Öarna, where nature and the cultural heritage are major attractions, the industry is an important source of both income and employment. Growth of tourism, however, puts pressure on the infrastructure and in the Öarna Objective 2 region, the limited funding available in this policy area was concentrated on strategic pilot infrastructure projects. Although the effects have been positive, demand for further investment in infrastructure remains considerable. Applica-Ismeri-wiiw 15

17 The mid-term evaluation of Norra Norrland pointed out that the Sámi projects were insufficient to achieve the targets set. The Sámi are traditionally dependent on the reindeer industry and the support provided was aimed at diversification and developing new products. The jobs created, however, amounted to only 47% of the target for men and just 37% of the target for women, demonstrating that diversification of activities is proving more difficult and taking longer than anticipated. The Structural Funds, however, have laid important foundations and have stimulated new small business start ups. The Södras skogslän region experienced similar problems as regards measures to support the Sámi. The objectives set at the beginning of the programming period have proved too optimistic and the diversification of economic activity has occurred much more slowly than expected. Applica-Ismeri-wiiw 16

18 5 FORMS OF INTERVENTION IN THE DIFFERENT POLICY AREAS Expenditure by broad category and form in Objective 1 regions 10 Policy category Total public expenses EUR million % Main forms of intervention 1 Direct support to firms Towards new establishments in rural areas (% of expenditure and sectors?) -Network creation 2 RTDI Direct support to firms for R&D 22 Indirect support for innovation Stimulate new ideas -develop R&D centres Network creation -Stimulate cooperation between R&D centres and economic activities 3 Infrastructure Transport infrastructure National/international transport networks 32 Other infrastructure Increase access to IT infrastructure -Stimulate usability of available infrastructure 4 Human capital Increase educational level -Increase female participation 5 Local environment Increase local attractiveness -Differentiated activities TOTAL 1, This is based on the DG Regional Policy Infoview database. For the relationship between the forms of intervention (the instruments ) and the Infoview categories, see the table at the end of the report. Applica-Ismeri-wiiw 17

19 Expenditure by broad category and form in Objective 2 regions Policy category Total public expenses EUR million % Main forms of intervention 1 Direct support to firms Network creations -Risk capital support 2 RTDI Direct support to firms Cooperation between R&D and economic activities -Competence development 22 Indirect support for innovation Development centres -Improve infrastructure for R&D 3 Infrastructure Transport infrastructure Regional enlargement through infrastructure investments -Connect rural and urban areas 32 Other infrastructure Quality support of IT infrastructure 4 Human capital Locally provided education -Stimulation through information campaigns 5 Local environment Develop the local identity -Facilitate cultural tourism TOTAL 1, POLICY IMPLEMENTATION The programmes in both Objective 1 and Objective 2 regions were monitored by a Monitoring Committee, installed by the government in summer The mid-term evaluations for both sets of regions criticised the implementation process as regards both the integration of horizontal goals, such as the environment and equality of treatment (primarily of men and women) and the failure to adequately prioritise projects that generate long-term effects. In the updated mid-term evaluation for the Norra Norrland Objective 1 region, it is concluded that the primary reason for the weak integration of horizontal goals was a lack of both know-how and time. This is illustrated by the fact that proposals closely linked to the core area and with well specified budgets were favoured over proposals more relevant for achieving the horizontal goals. At the same time, the perceived failure of projects to incorporate horizontal objectives, recognised in the mid-term evaluations, led to some re-orientation of policy. As described in several updated mid-term reports, NUTEK (the Swedish Agency for Economic and Regional Growth) established a working group with representatives from each region to arrange workshops and courses for those responsible within the relevant managing authorities on these objectives and how to take account of them. Most of the updated mid-term evaluations report that these measures improved the situation and led to more attention being given to horizontal objectives. Applica-Ismeri-wiiw 18

20 Other action was also taken in this regard. In the Västra Objective 2 region, for instance, the application forms for projects were changed after the mid-term evaluations to require proposers to specify the particular activities which were aimed at meeting the horizontal objectives and to explain how they would do this. Previously all that was required was to give an overall assessment of the impact of the project as a whole, which led to most projects being perceived as having a neutral effect. The second general area of criticism of the implementation process has proved harder to tackle. The evaluations generally recognize the difficulty of determining a priori which projects have long-term effects and which do not. As an example, the mid-term evaluation for the Norra Objective 2 region suggested the need to prioritise projects with good prospects for developing dynamic effects. In the updated mid-term evaluation, however, the Managing Authority is reported to believe that this was not a fruitful way to discriminate between projects given the near impossibility of determining which projects were dynamic beforehand and that any such delineation would be highly subjective. It, therefore, did not implement the mid-term evaluation recommendation. The general impression from the evaluations is that in both Objective 1 and Objective 2 regions, the prioritisation of projects with long-term effects led to a focus on those involving investment to improve infrastructure, both physical and intangible. The Västra Objective 2 region, therefore, for example, focused funding on the development of clusters and IT infrastructure. So far as experience in implementing policies is concerned, a number of reports drew attention to potential conflicts between those involved in different projects. In particular, they point out that when the financial resources for one type of project is tight, regional actors tended to switch to other sources of finance, creating tensions between different stakeholders. For instance, in the Norra Norrland Objective 1 region, when the finance for R&D ran out, universities began to apply for funding assigned to the development of regional industry. This created a situation in which businesses and universities competed for resources and the latter obtained finance that in effect should have gone to business-related projects. The Managing Authority however did not consider this to be a major problem. 7 GLOBAL EFFECTS As stated above, most evaluations maintain that policy had a real effect on education and the development of competences and that the targets set for the number of jobs and firms to be created were, in general, achieved. The general interpretation is that this indicates success as regards the potential for changing the economic structure of regions, i.e. from agriculture Applica-Ismeri-wiiw 19

21 and low-tech manufacturing to knowledge-intensive services and high-tech manufacturing, which was a common goal of the programmes in both Objective 1 and Objective 2 regions. Such an interpretation, however, is difficult to justify since neither new firms nor new jobs are classified by sector. Moreover, there are difficulties in assessing the survival rate of new jobs and firms and hence the long-run effects of intervention. Whether the new jobs and firms will remain when the programmes come to an end remains unclear. Examining changes in aggregate figures over the programming period (insofar as this is possible given the data at present available), it is evident that the employment share in agriculture has declined whereas the employment share in advanced services (finance and business) increased in assisted regions between 1999 and However, the change was in line with that in the rest of the country. The picture is similar for changes in education attainment levels. Between 2001 and 2006, the percentage point change in the proportion of working-age population with tertiary education in Objective 1 and 2 regions was roughly the same as in the rest of the country. On the other hand, the reduction in unemployment rates in Objective 1 and 2 regions was slightly larger than in other regions, while the growth rate in GDP per head was also higher (3.1% compared with 2.5%), indicating some catching-up. From evaluation reports, there are few concrete examples of policy succeeding in altering trends and development paths in the regions in any significant way. The Objective 1 regions still suffered depopulation. The evaluations for the Södra skogslän Objective 1 region, for instance, claim that over half of the total population decline in the last 16 years took place over the most recent 6 years. Depopulation has also continued in the Norra Norrland Objective 1 region. 12 The updated evaluation report indicates that between 1993 and 2002, the growth of in GRP per head as well as wages was below the national average (which is also the case in Södra skogslän), but it emphasises, as others, that this does not mean that policy has failed. The common line of evaluation reports is that policy measures have increased the potential for altering trends over the long-term. The policies are claimed to have contributed to adapting the regional development path to the requirements of global competition (development of the knowledge economy, focus on the importance of human capital, expansion of international trade, development of advanced services, establishment of scientific and cultural exchanges), in the sense that the potential for such adaptation has been increased. Moreover, it is maintained that the programmes have stimulated 11 See Table 1: Regional disparities and trends, at the end of this report. 12 Given these examples, it is clear that it is difficult to suggest that policy has any impact on agglomeration effects or has stimulated critical mass. Applica-Ismeri-wiiw 20

22 collaboration efforts across counties in the respective regions and as such have increased the potential for further large-scale policy initiatives. Objective 2 regions are in a similar situation to Objective 1 regions. In the Norra Sverige Objective 2 region, for example, almost all small municipalities have been losing population and only the larger towns and cities have succeeded in maintaining population levels. According to the updated evaluation report, the overall judgement is that high unemployment will persist in the future, implying continuing population decline. Nevertheless, the evaluation reports emphasise that the policy measures have increased the potential for long-term growth and structural change. 8 ADDED VALUE OF THE EU CONTRIBUTION It is very difficult to disentangle the extent to which EU cohesion policy contributed to regional development and led to beneficial changes taking place which would otherwise not have occurred. The following statements from evaluation reports 13 illustrate this. - An interesting question to pose is: what would the region s development look like in the absence of the support from the Structural Fund and other sources? It is only possible to speculate about what the figures pertaining to unemployment, new firm formation and enrolment in higher education would have been (p. 34 updated mid-term evaluation report for Objective 2 region Norra Sverige) - We can conclude that the programme contributes and has contributed to initiating and supporting regional and local business-support measures. Even if it has not been investigated in this report, we can assume that many of the initiatives would have been difficult to realise in full without the finance that the programme made available. (p.61 updated mid-term evaluation report for Objective 2 region West) - the programme s financial size is relatively small in relation to the total amount of money that is in circulation in the region. With this in mind, the programme s opportunities to single-handedly influence the development of the region as a whole are relatively limited (p.2 English summary of updated mid-term evaluation report for Objective 1 region Södra skogslänen) The general message in the evaluation documents is that it is difficult to discuss the addedvalue of the Structural Funds for the regions in quantitative terms, but that there is much qualitative information. The same messages are come out of the annual reports. As regards new firm creation and new collaboration projects, the updated mid-term evaluations for the Södra and Öarna Objective 2 regions recognise that some projects would 13 Freely translated from Swedish to English. Applica-Ismeri-wiiw 21

23 probably have taken place without the support from the Structural Funds (see updated midterm evaluations for Öarna p and Södra p ). However, surveys indicate that some projects would not have been initiated or would have been undertaken on a smaller scale. Many project leaders also reported that access to finance from the Structural Funds was vital for their projects success and development. In the evaluation report for Södra, it is explicitly stated that the economic contribution from the EU and the Structural Funds is very important for actually being able to realise ideas through different initiatives (p. 39, freely translated from the Swedish). 9 LESSONS FOR THE FUTURE A common issue raised in the evaluation and other reports, particularly in the Objective 1 regions, is that the goals have been set very high and that they are formulated in such a way that it is difficult to determine the extent to which they have been met. For instance, in the updated mid-term evaluation report for Norra Norrland (p.84-85), it is stated that the overall goal of the programme is that the region shall have an economy with at least the same growth as other successful regions in and Europe and that full employment shall be attained in the context of sustainable development and an equal society. As pointed out in the report, there is a significant discrepancy between the goals set and what in practice it is possible to achieve given the volume of finance that the Objective 1 programme comprises. Along the same lines, a common comment is that the results that the programmes are intended to achieve should be better defined. The majority of the evaluation reports emphasise the difficulty of disentangling programme effects from other effects. This is most evident when goals are highly over-estimated or under-estimated, especially in the case of regions with wide-ranging programmes such as Norra Norrland. Accordingly, the risk of missing goals can be reduced by defining them very broadly, but this comes at the cost of a low degree of accuracy in being able to assess the effects of policy. Conversely, accuracy can be increased by setting narrowly defined targets, but these may not always be particularly relevant ones and may encourage an overly narrow focus as regards policy. Several reports also point to the need to develop a better indicator system, since those at present in use are held to lead to biased evaluation. As discussed above, in several instances, single policy measures account for a substantial share of the results of entire programmes in terms of core indicators (employment and new firm creation). Moreover, while many number of programmes put a great deal of emphasis on education and the development of competences, it argued in the reports that the current indicator system is not capable of providing a true picture of the effects of such efforts. Applica-Ismeri-wiiw 22

24 The updated mid-term evaluation for the Västra Objective 2 region (pp ) raises another relevant issue which is not discussed in detail in the other reports. It is pointed out that several municipalities in the region are more dependent on the development of large towns or cities in surrounding areas than on development within the programme area itself. For this reason, it is suggested that consideration should in future be given to allocating part of the funding to projects outside the programme area as such. As indicated in the report, it is far from certain that the best partners for an actor in an Objective 2 municipality to cooperate with are those situated in the area covered by the programme. By recognising interdependencies between municipalities, EU support could better contribute to stimulating dynamic effects rather than simply being a form of compensation support. The general point is that the geographical areas delineated for Structural Fund support should be given more consideration and as part of this, as noted in the updated mid-term evaluation for the Västra Objective 2 region, more attention should be paid to functional regions based on economic interdependencies and commuting flows and not simply to administrative regions as such. Applica-Ismeri-wiiw 23