REGIONAL COUNCIL OF LAPLAND OPINION 20 January 2011 North Finland EU Office Allan Perttunen RE: Opinion of the Regional Council of Lapland about issues related to the 5th Cohesion Report Reference: 31 December 2010 5. COHESION REPORT The Regional Council of Lapland is of the opinion that the Commission Communication on the 5 th Cohesion Report is a good introduction for further preparatory work. Especially important to Lapland are the Commission s proposals concerning support to northern sparsely populated areas. Northern sparsely populated areas, including Lapland, have implemented the structural policy programmes of the European Union successfully since 1995. During this time unemployment in Lapland has decreased by a half from 27% to 13.5%, the net number of jobs has increased by approx. 7 000 8 000, and especially the private sector has seen considerable growth, compensating for the fall in public sector jobs. On the other hand, Lapland has also suffered from severe national migration loss, especially in 1995-2006. However, the population trend has adopted a steadier pattern in the last few years. Lapland s population has decreased by some 19 000 people, or 10%, during Finland s EU membership. This has partly led to the considerable ageing of the population structure in the region. Through its development actions, Lapland is capable of strengthening the European economy and innovation policy and contributing to the implementation of EU policies as an active player. In particular Lapland has competence and added value to offer to the implementation of the EU s arctic and mineral strategy, climate change policy and the experience industry. However, to become an even more competent and globally more competitive player, Lapland needs European partnership and continued access to EU structural fund programmes. It is important with regard to the competitiveness of Europe and Lapland that the regional and structural policy is continued throughout the European Union. However, the emphasis in financing should be on the poorest regions and those suffering from severe, permanent natural handicaps, including the northern sparsely populated areas denoted in the EU s new Treaty. The assignment of special criteria must be closely based on the definition of the Objective 6 Area according to the Treaty of Accession. The Regional Council of Lapland considers it important that the ageing of population is
strongly taken into consideration. Preventing exclusion should be considered an increasingly important means of creating a competitive Europe. Improving regional competitiveness also calls for new competence-based business and a broad, especially user-oriented perspective to innovations. It is important that northern sparsely populated areas can focus on the best, tried and tested flagships, emphasising within the flagships those activities for financing that are suitable in view of regional structures. In the future regional and structural policy, it must be possible to focus on themes that will most effectively promote competitiveness and employment in each region, based on the guidelines of the Europe 2020 Strategy for generating smart, sustainable and inclusive growth. Future programmes must take account of specific regional conditions and the competitive disadvantages and development challenges imposed by them. Therefore, the contents of the various programmes must be specified in more detail in the programme areas. Direct development and investment support to companies is an effective, useful instrument whose continued availability in the programme policy must be secured. According to the Regional Council of Lapland, it is a good starting point to link the structural and other support in the EU s budget to complying with the Stability and Growth Pact. The Regional Council of Lapland considers it necessary to continue cross-border regional cooperation and to enable the regional coordination of different programmes. Management should not be simplified for the sake of management only but the process should also take the customer perspective into consideration. The detailed opinions of the Regional Council of Lapland are provided below. Rovaniemi Esko Lotvonen Executive Director Marko Varajärvi Acting Development Director 2
Main content and detailed opinions: 1. The 5th Cohesion Report and connecting factors Discussion about reforming regional and structural policy is closely connected with debate on the financial framework and the Europe 2020 Strategy. More than one third of the EU s entire budget will be spent on regional and structural policy during the current programming period. Structural funds are the most important instrument at the level of the EU for funding the growth, competitiveness and employment goals of the European Union. From a regional perspective, most of the financing allocated to Finland goes to Eastern and Northern Finland. According to Article 175 of the Lisbon Treaty, the Commission shall submit a report every three years on the progress made towards achieving economic, social and territorial cohesion (Cohesion Report, General Regulation, Article 31). The 5th Cohesion Report of the European Commission was published on 10 November 2010, and the public hearing will end on 31 January 2011. The Communication does not yet provide an opinion about financing and the geographical coverage of actions. These proposals will be included in the Package of Regulations to be issued in June 2011 and in proposals concerning Financial Frameworks. The Communication stresses the concentration of resources on achieving the Europe 2020 objectives and targets. The proposal emphasises the adoption of a more result-oriented cohesion policy while streamlining and simplifying the implementation systems. When stressing productivity, the needs and challenges of the regions should not be forgotten. In addition to supporting growth throughout Europe, the programmes must be capable of addressing development needs stemming from specific regional needs. Efforts to streamline and simplify the implementation system should also set out from these starting points, which the regions are familiar with. 2. Proposals concerning the content of the cohesion policy Proposals concerning the content of the policy can be grouped with regard to promoting the traditional cohesion policy objectives, i.e. economic and social cohesion, on the one hand, and promoting territorial cohesion on the other, which through the adoption of the Lisbon Treaty was approved as the third main goal of the cohesion policy. 2.1. Economic and social cohesion (Page 4, Section 2.2 and Page 10, Section 5) 3
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Commission Communication on the 5th Cohesion Report shows a strong effort towards thematic concentration and linking the cohesion policy to the implementation of the objectives and targets of the Europe 2020 Strategy. This means that resources are concentrated on a small number of priorities that are directly connected with the Europe 2020 Strategy, which means that operative objectives would be the same regardless of the amount of support. From the point of view of Lapland, this concentration could be implemented in Finland by still making more diversified forms of support available to NUTS II areas, i.e. Northern and Eastern Finland, in the same way as during the current programming period. Europe 2020 policy supports development that aims to improve competitiveness, promote employment, reduce social exclusion and improve the state of the environment in every region. It should be noted, however, that in terms of its regional, service and business structure, Northern Finland is a challenging operating environment. Therefore, business projects implemented through structural fund resources, for instance, play a prominent role in the region. According to the Communication, the cohesion policy covers all regions and Member States. There will be a change from the current programming period in that the new period will not have separate goals with specific policy contents and objective programmes. Therefore, a convergence objective (Objective 1) and an employment and competitiveness objective (Objective 2) would not be determined separately for the coming period. Instead, all the Member States, regions and programmes would share one common objective, which would be differentiated according to regional levels of development. The Regional Council of Lapland welcomes the Commission s proposal for implementing a common objective in all the regions for improving competitiveness and employment. This would also clarify implementation and the structure of the programme. In any case it is absolutely essential that the regions draw up their programmes on their own and choose those programme emphases that best support their regional development. As in the current programming period, the 75 per cent GDP criterion at the NUTS II level would still remain as the criterion for the highest support. In addition, all other regions would be eligible. The Commission also proposes a specific category of intermediate regions in order to replace the statistical effect regions (phasing out) and growth contribution regions (phasing in) in the current system, and for regions that will not be included in present convergence. The policy to be reformed should be regionally more selective and based on the regions specified in Article 174 of the Lisbon Treaty in particular. From Lapland s point of view, the GDP criterion should be supplemented with other, new criteria when allocating support. Development in sparsely 5
populated areas, including demographic development, should be clearly included in the NUTS II level criteria in the cohesion policy and taken into account in the same way as the GDP criterion would be treated. However, there must be specific financial emphasis within the programme area on the Objective 6 Area for particularly sparsely populated areas in accordance with the Treaty of Accession, as in the current programme for Northern Finland. The Regional Council of Lapland considers it important that the regional and structural policy is continued throughout the European Union. The emphasis in financing should be on the poorest regions and ones that suffer from severe, permanent natural handicaps. In more prosperous regions, financing would most naturally be targeted at international inter-regional programmes. The way in which cohesion funding will be allocated to different types of Member States and regions must be defined more clearly in further preparatory work. Arrangements for areas in transition should be clarified. The Communication also takes up the question of how the operation of the ESF could be redirected so that it would better take into consideration the 2020 targets and objectives and how its visibility could be enhanced by predicting funding volumes, for instance. ESF would still contribute to the implementation of the guidelines for the economic and employment policy and maintain its role as a structural fund. The Communication stresses the role of the ESF in the implementation of the European employment strategy and employment guidelines. Key measures include ensuring the availability of labour, increasing participation in the labour market in all categories, improving competence and controlling structural changes. The Regional Council of Lapland considers important the Commission s proposal that the European Social Fund will continue to be an important part of the regional and structural policy. It also welcomes efforts to improve the focus in ESF actions. From the point of view of Lapland, this would mean that ESF resources will be even more clearly targeted at combating poverty and promoting inclusive activities. According to the Communication, support to regional cooperation through the cohesion policy will continue more or less as it is (cross-border, trans-national and interregional cooperation), yet with a view to clarifying and simplifying programming. Furthermore, it is proposed that procedures concerning cross-border cooperation and the management of the external border instrument (ENPI), for instance, should be simplified. The implementation of international cooperation funded out of different funds (ERDF, ESF) will be clarified. The Regional Council of Lapland considers it very important that cross-border regional cooperation is continued. Finland has specifically underlined that management responsibility for EU-Russia cross-border cooperation (ENPI 6
CBC) should be moved from the Directorate-General for External Relations to the Directorate-General responsible for regional development, so that the implementation of the various programmes can be strengthened through common practices. It is also important that the emphasis in ENPI CBC programme activities and the programme management remain in the regions and that different forms of support are coordinated to work for the best of the regions even more flexibly. 2.2. Territorial cohesion (Page 7, Sections 3.1 and 3.2) The Lisbon Treaty added territorial cohesion as the third main goal of the cohesion policy in addition to economic and social cohesion. Regional cohesion is understood as taking better account of the specificities of individual regions. The Communication discusses in the context of territorial cohesion the urban and macro-regional strategy policy and the regional problems caused by geographical location and demographic trends. This can also be considered to include partnership initiatives for local development. 7
The Communication recognises that specific geographical or population structure features (demography) could intensify development problems. In addition to overseas regions, the Communication specifically mentions northernmost sparsely populated areas and cross-border and mountain regions (Lisbon Treaty, Article 174). The possibility to introduce special arrangements in order to account for these specificities is also proposed. In addition, the importance of urban-rural interaction is taken up as a means of securing access to services, for instance. The Regional Council of Lapland considers it very important that the Communication specifically recognises the specific development needs of northern sparsely populated areas. To Finland, securing the position of these areas according to what is said in Article 174 of the Lisbon Treaty and Finland s Treaty of Accession is a key issue. Northern sparsely populated areas suffer from severe permanent natural handicaps that are exceptional in view of entire European Union, such as long geographical distances, sparse population and arctic natural conditions. In addition, of all the Member States of the European Union, Finland has the longest land border with Russia. The EU s regional and structural policy should be continued and developed in a way that takes proper account of the special conditions characteristic of these areas. From the point of view of Lapland, specificities connected with population structure should also be expressly recorded. In Lapland, sparse population and the evidently distorted population structure pose a major challenge to the development and competitiveness of the region. The challenges faced by sparsely populated areas in Lapland and the changes in the economic and service structure caused by structural change have been addressed successfully during the previous programming periods. Programming has played an important role in creating 16 000 new jobs in the business sector. In addition, the competitiveness of education institutions in the region has been improved by combining ESF and ERDF support. The Communication proposes that in future new macro-regional strategies should be based on a thorough review of the experiences gained of the existing strategies and of the available resources. The strategies should be broad-based and focused on the key social challenges facing Europe. The programmes would be funded out of EU programmes and national sources. From the point of view Lapland, it is important that cross-border regional cooperation is continued. The present programme structure for cross-border cooperation (INTERREG IV A) should be maintained. In addition, the transnational programmes in the north (INTERREG IV B) have been well grounded and implemented. 8
For Lapland, an important cooperation venue is the northern sparsely populated area (NSPA), which consists of Northern and Eastern Finland, Northern Sweden and Northern Norway. Successful cooperation has been pursued in the region and a common strategy has been prepared for the coming programming period. The regions largely share the same challenges that are characteristic of all sparsely populated areas, so the finding of common solutions under the EU s new cross-border funding programme would be a natural way of continuing efforts to deepen and develop the cooperation. The experiences and resources of macro-regional strategies should be investigated. In addition, the macro-regional strategy for the Baltic Sea Region should be implemented more effectively. The strategies could be implemented most conveniently through financing from the existing programmes. However, caution should be exercised in the establishment of new macro-regional programmes until the pilots have been properly analysed. The Communication underlines the question of urban policy. It contemplates on the role of urban areas as the engines for creativity and innovations. However, the focus in the Communication is on urban problems, such as environmental degradation and social exclusion. The Communication also considers whether the regulatory architecture of the cohesion policy should allow greater flexibility in order to enable the implementation of objective programmes at levels lower than the national or regional level, such as groups of towns or of river and sea basins. The Communication stresses problems characteristic of metropolitan areas, an approach that applies poorly to arctic conditions and those prevailing in Lapland. From the point of view of Lapland, the importance of towns in increasing growth and improving competitiveness and competence stems from their role in network cooperation. Towns are already strongly engaged in development activities and their role need not be specifically emphasised. The urban programme policy underlines environmental and social problems. Addressing environmental problems should be part of the national policy. More ESF funds can be channelled to addressing social problems, where necessary. The Communication stresses on the basis of the Europe 2020 Strategy that methods of local development should be developed that among other things would support local inclusion, social innovations, innovation strategies and the designing of schemes for regeneration of deprived urban areas. This would be a Leader type approach. In this context, the Communication takes up the possibility to earmark financing for local development, which should be developed in cooperation with corresponding activities in the EAFRD. 9
Good experiences have been gained in Lapland and in Finland as a whole of local development measures implemented through national and EU resources, in which the various regions, municipalities and local actors play a prominent role. However, decisions about the means of local action should be made at the national level. 3. Strategic programming (Page 3, Section 2.1) To strengthen the added valued offered by the cohesion policy, the Communication proposes a more results-based policy. To ensure coordination with the Europe 2020 Strategy, it also proposes clearer control at the level of the EU and a more strategic negotiation process. The objective programmes would still exist, and they make up an important tool in the implementation of the Europe 2020 Strategy. An annual report based on the quantitative and economic indicators of the Member States and complying with the Europe 2020 governance cycle will be drawn up in April. Based on the annual report, there will be political debate in the Council and the Parliament. This would mean that the ministers responsible for regional development would hold an official meeting once a year. The Regional Council of Lapland agrees with Finland s viewpoint according to which the plan and programme architecture expressed in the Cohesion Report involves too many steps and would lead to a highly complex preparation and coordination mechanism. The Member States can draw up their own plans directly on basis of the Europe 2020 Strategy, which would allow reducing the number of control levels (e.g. the community strategy). Partnership agreements should only focus on issues most relevant from the point of view of each Member State. The Regional Council of Lapland points out that the long-term regional development work done during the previous programming periods offers a good foundation for prioritising the policies of the regions. In this context, the Regional Council of Lapland wishes to bring to the fore in particular the emerging importance of northern sparsely populated areas in Finland to the competitiveness of the European Union. Especially arctic areas in the north contain vast natural resources the utilisation of which will support the goals expressed in the European natural resources strategy and strengthen the energy self-sufficiency of Europe. It must be possible in future programming to flexibly and comprehensively develop and finance the utilisation of the natural resources and competence available in arctic northern areas. In addition, sparsely populated areas offer major added value to the sustainable development of Europe. Sparse population and the resulting development challenges offer a genuine starting point for taking account of sustainable development and the sustainable use of natural resources. 10
4. Implementation system (Page 4, Sections 2.3-2.5) According to the Communication, the main goal is to improve productivity and effectiveness, ensure appropriate use of the financial resources and keep the error margin small. The implementation system would basically remain the same as in the current programming period, while the Commission will propose improvements to the system currently in use. The conditionality of support will be extended, as a result of which appropriations could be suspended or cancelled altogether. However, the sanctions will not include the repayment of funds. Conditionality will only concern cohesion policy. New preventive means will be developed and agreed bilaterally between the Member States and the Commission. Conditionality will not be tied with structural and institutional reforms in the Member States. According to the Regional Council of Lapland, it is a good starting point to link the structural and other support in the EU s budget to complying with the Stability and Growth Pact. This is because the benefits offered by structural and other support can only materialise when the structure of finances is sound and in balance. Productivity and improving effectiveness have already been recognised as goals in the programmes implemented in Lapland during the current programming period. When assigning indicators, the starting points of the various regions should be taken into consideration instead of excessive alignment. When expanding the conditionality of support, care should be taken not to hamper the effective regional implementation of the programmes. It is important that all financial sanctions are imposed on national budgets, not directly on single actors receiving support. The co-financing principle will be maintained but the contributions will be adjusted to better reflect economic development in the Member States. This can mean that the maximum community contribution percentage in some regions can be more than the current 85 per cent. It is important to Lapland that the co-financing principle is maintained, as it will support the implementation of the principles of sound finances. The Commission proposes the adoption of new financial instruments. The purpose with the new forms of finance is to move away from the traditional grant-based financing towards a system where financial instruments can be diversified and combined and new financial arrangements adopted. The rules governing eligible costs will be drawn up separately for grant-based financing and repayable forms of assistance. The intention is also to extend the use of new financial instruments in the combining of private and public financing (Public Private Partnership PPP). 11
The Regional Council of Lapland considers it justified to extend the use of the new financial instruments. However, the challenge here is that their adoption calls for major changes to acts and national systems. In addition, based on the experiences gained during the past few years, it is challenging to pursue a venture capital scheme in Lapland, as the results have been poor. The Regional Council of Lapland stresses the importance of maintaining business subsidies in the objective programmes in the future, too. This form of finance has proved effective in Lapland as part of the structural policy. The Commission proposes the adoption of a performance reserve. Funds would be earmarked out of the cohesion budget and directed to activities promoting the implementation of the Europe 2020 Strategy and to experimental innovative projects and networking. The Commission also proposes that some of the cohesion policy budget be allocated later, during a mid-term review, to programmes that have implemented the Europe 2020 Strategy most effectively. The performance reserve was also discussed in negotiations during the current programming period, at which point it was proposed that unused resources (the N+2 rule) could be allocated to successful programmes. The Regional Council of Lapland considers the adoption of the performance reserve unnecessary. The goal is only acceptable if it is genuinely used to create a practise for recognising those regions that have implemented their programmes most successfully. In addition, the recognition should provide the regions with real access to additional resources. However, this will place a challenge to measurement indicators, as using the money expenditure rate, for example, as an indicator will not measure the results of the financing. Implementation system From the point of view of the Regional Council of Lapland, the subsidiarity principle is an effective, tried and tested starting point in regional and structural policy. The regional councils represent the key regional actors and their decision-making process is democratic. The Regional Management Committee has representatives and social partners from different sectors of the society. Decisions made in the EU and at the national level about the coming programming period must support partnership and the subsidiarity principle in the organisation of management. The Regional Council of Lapland supports the broader use of simplified payment methods, if the experiences gained about the programming period 2007-2013 are positive. Reducing administrative burden is the right starting point. Intermediary authorities should be consulted for their experiences in order to gain the expertise required for streamlining. This should be borne in mind at the level of the EU and also nationally when creating management and control systems or compiling project verification and control rules. 12
The Regional Council of Lapland also feels that it is a good starting to combine the eligibility rules of several EU funds in order to reduce the administrative burden imposed on beneficiaries and those responsible for management, in so far as this is practicable. It should be noted that the adoption of provisions governing ESF implementation cannot be applied to activities funded out of ERDF. Management should not be simplified for the sake of management only but the process should also take the customer perspective into consideration. 13