Law Regions Development

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DUNICOP

Law – Regions – Development

Tímea Drinóczi, Mirela Župan (eds.)

Law – Regions – Development

Tímea Drinóczi, Mirela Župan (eds.)

Pécs – Osijek 2013

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Law – Regions – Development © Edited by Dr. habil. Tímea Drinóczi, PhD, associate professor, Department of Constitutional Law, Faculty of Law, University of Pécs Mirela Župan, PhD, assistant professor, Department of Private International Law, Faculty of Law, J. J. Strossmayer University of Osijek 2013 © Authors, Tomasz Milej, Samir Felich, Zoltán Gál, Nihada Mujić, Martina Mikrut, Dunja Duić, Ágoston Mohay, Tunjica Petrašević, Ivana Barković Bojanić, Tibor Kiss, Katarina Marošević, Jelena Dujmović, Ana Đanić, Eszter Rózsás, Attila Pánovics, Rajko Odobaša, Anita Blagojević, Tímea Drinóczi, Miklós Kocsis, Boris Bakota, Adrián Fábián, Boris Ljubanović, Zsombor Ercsey, Emina Jerković, Renata Perić, Csaba Szilovics, Zsuzsanna Peres, Miro Gardaš, Jelena Roškar, Višnja Lachner, Josip Vrbošić, Marko Petrak, Nikol Žiha, János Jusztinger, Ivana Tucak, Antal Visegrády, Mirela Župan, Kolos Kovács, László Kecskés, Gergely Czoboly, Paula Poretti, László Kőhalmi, Barbara Herceg, Igor Vuletić, Igor Bojanić, Erika Kovács, Mario Vinković, Zoltán Bankó, Edit Kajtár, Helga Špadina, Mária Márton, Dubravka Klasiček, Nataša Lucić, Dubravka Akšamović, Lilla Király, András Kecskés, Zvonimir Jelinić, Adrienne Komanovics, Nives Mazur Kumrić, Ljiljana Siber, Biljana Činčurak Erceg, Melinda Szappanyos, Péter Tilk, Zsuzsanna Horváth, Jelena Legčević, 2013

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Reviewed by Rajko Knez, full professor of European law, Faculty of Law, University of Maribor, Slovenia Nada Bodiroga Vukobrat, full professor of European law, Faculty of Law of University of Rijeka, Croatia Dr. Ádám Antal DSc, doctor honoris causa at Faculty of Law, University of Pécs, former judge of the Constitutional Court of the Republic of Hungary © Faculty of Law, University of Pécs and Faculty of Law, J. J. Strossmayer University of Osijek, 2013

Editorial Board Dr. László Kecskés, DSc, member of the Hungarian Academy of Sciences, Faculty of Law, University of Pécs prof.dr.sc. Igor Bojanić, Faculty of Law, J.J. Strossmayer University in Osijek prof.dr.sc. Eduard Kunštek, Faculty of Law, University of Rijeka Dr. Szalayné dr. Sándor Erzsébet, PhD, dr. habil., Deputy-Commissioner for Fundamental Rights, Responsible for the of Nationalities, Budapest Dr. Imre Vörös, DSc, member of the Hungarian Academy of Sciences, Centre for Social Studies, Institute for Legal Studies, Budapest prof.dr.sc.Zvonimir Lauc, Faculty of Law, J.J. Strossmayer University in Osijek Dr. Antal Visegrády, DSc, Faculty of Law, University of Pécs doc.dr.sc. Mirela Župan, PhD, Faculty of Law, J.J. Strossmayer University in Osijek Dr. Tímea Drinóczi, PhD, dr. habil., Faculty of Law, University of Pécs prof.dr.sc. Mario Vinković, Faculty of Law, J.J. Strossmayer University in Osijek 3

Published by Faculty of Law, University of Pécs 7622 Pécs, 48-as tér 1, Hungary and Faculty of Law, J. J. Strossmayer University of Osijek S. Radića 13, Osijek, Croatia

ISBN: 978-953-6072-76-7 (print) 978-953-6072-77-4 (online)

Responsible for publishing: László Kecskés and Igor Bojanić Published by Kódex Nyomda Kft. 7627 Pécs, Rigóder út 29, Hungary Director: Béla Simon

The content of this book is indexed in EBSCO database. CIP zapis dostupan u računalnom katalogu Gradske i sveučilišne knjižnice Osijek pod brojem 130927041

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Foreword by the President of the Republic of Croatia It is also a privilege to write forewords to books (conference proceeding) published sequentially that represent coherent and consistent research work as well as a firm and well established co-operation between the two neighboring universities. University of Pécs and University in Osijek started their IPA co-operation within the EUNICOP programme. Croatia was not a member state of the European Union, but as a candidate it could boast at that time that her legal system had been harmonized with the acquis of the EU to the maximum extent. It was not enough; we had to prove the ability to implement acquis in the practice as well. Universal legal analysis, both scientific and professional, comparison of standards and of the practice with those countries that had already gained experience in the implementation of the acquis, was certainly necessary for adopting the acquis in such a way that would allow the realization of its ratio legis. These were the topics of the two previous proceedings which provided an excellent basis for narrowing as well as widening the research topic at the same time. This book, a collection of papers titled ‘Law – Regions – Development’ is dedicated to the issues of regional development and environmental protection; and at the same time, it applies not only a legal approach, in strictu sensu, but some economic perspectives as well. Croatia has recently become EU member state. Due to historical circumstances Hungary joined the EU before Croatia. Hungary was more than heartily supporting Croatia in her efforts to satisfy all the conditions for EU membership, and has been advocating for and encouraging Croatia. As one of the priorities of her EU presidency in the first half of 2011, Hungary set out the completion of Croatian accession negotiations with the EU. Furthermore, Osijek and Pécs are regionally connected and they are constantly emphasizing the importance of universal and quality cross-border relations, not only through the cooperation of their universities, but also through every other form of cooperation. Today, in Europe without borders, cross-border cooperation of Osijek and Pécs will become even more important. Finally, this book has been co-financed by the European Union through the IPA cross-border program HungaryCroatia, which shows that the EU itself has recognized Osijek and Pécs as centers of jurisprudence that are able to universally analyze particular aspects of regional development and environmental protection. The publishers and authors certainly deserve praise for the choice of topic, the quality of papers, and the message they are sending to the 5

Croatian and Hungarian professional and general public. This message is very simple: Croatia and Hungary are part of the common European legal space, countries that are directed toward each other, countries whose resemblances are much greater and much more important than possible differences resulting from the different historical circumstances in which they have followed their European way. Zagreb, 10 October 2013 Prof.dr.sc. Ivo Josipović

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Foreword by Former President of Hungary László Sólyom to the Conference Proceedings of the DUNICOP Project Co-Managed by the University of Pécs and J.J. Strossmayer University of Osijek 1. I gladly joined President Josipović in his gesture of writing a foreword to the volumes reporting on the joint research undertaken by the law faculties of Pécs and Osijek. He did so for each book separately; while today I can see all three research reports at the same time. The earlier forewords by the Croatian head of state were written in the spirit of Croatia’s accession to the European Union. The Pécs-Osijek project itself leans on a European Union tender. Cooperation between the two universities has demonstrated both Croatia’s preparation and maturity for membership as well as cooperation between the two countries – one might say, cooperation not at an official inter-governmental, but rather a civil level, also providing an example for inter-regional relations. Although we shared only a short period together as presidents of our respective states, the symbolism of these volumes is perhaps enhanced by the fact that it was on the very site of the one-time university in Pécs that in April 2010 the Hungarian, Croatian and Serbian heads of state conducted talks, amongst others, on topics that the University of Osijek and the present University of Pécs had been working on together. Apart from the European Union and environmental protection, such issues were, for example, the collective rights of national minorities or dual citizenship. At their meeting in Pécs the presidents also declared that they recognized and would promote the concept of cultural nation (irrespective of citizenship) within the Union. 2. The three volumes of essays reflect the almost self-organizing thematic development of the research. The first year dealt with rather general, ‘cross-border’ (common?) legal issues. The second one also deals with ‘legal challenges of our era’. These may indeed include almost anything. As a matter of course, each year at least half of the work is taken up by the EU; on the other hand, other topics come up repeatedly, such as local governments, environmental protection and regions. Thus a part of the papers already anticipate the focus of the third year on regional governance. It may be interesting to note the predominance of private law topics in the second volume – which seems to be a single burst of enthusiasm in the light of the theme of the third year. It is apparent that the around thirty essays born every year have mobilized the entire two faculties. This is revealed not only in the rich diversity of topics, but also in the fact that all writings, almost without exception, have been co7

authored between Croatian and Hungarian participants. Consequently, there has been a real dialogue, mutual learning about each other’s way of thinking, preparedness, methodology and preferences. 3. And now we have arrived at the key and underlying essence of the whole joint work supported by the Union: can the European Union create a common culture? This question is particularly interesting with regard to the Pécs-Osijek relationship as well as Croatian-Hungarian relations. This is so because the earlier common culture has not yet become totally extinct here – and the legal part of this culture enables us to draw peculiar lessons for the very reason that Croatia always held an autonomous constitutional legal status within the Kingdom of Hungary. As a matter of course, by common culture I do not mean one-time Hungary or the Austro-Hungarian Empire, but rather the Central-European culture which might be referred to as Central-Eastern-European today, but the borders of which from time to time emerge from below the North-South and East-West fault lines of the European Union. This heritage has its effect even if we are unconscious of it or we do not want to be aware of it. However, the question is whether it is powerful enough to renew itself and contribute its own special colour to a new (legal) culture within the EU. Nevertheless, apart from voting quotas on the one hand and the unpredictable effect of specific cultural achievements on the other hand, there are special intermediate possibilities for having a voice especially in the field of law. For the achievements of legal culture may become institutionalized. We speak of the common constitutional tradition of Europe – she is also referred to by the European Court of Justice. Today’s intensive communication provides an unprecedented opportunity, for example, for decisions of a Constitutional Court to become the object of constitutional borrowing; but good practices of governance may similarly exert their influence just like bad practices set as negative examples to be avoided. These practices may become well-established in the soft law of various bodies or may become habitual through adoption. The Pécs-Osijek cooperation experiments with the common culture in the laboratory of a small border region. Still, international queries received from unexpected locations may be monitored on the website of the project: this work is not confined to the region. The reader, to whom I recommend the work of the authors for further contemplation, will himself become a shaper of legal culture. Budapest, November 2013 László Sólyom 8

Content FOREWORDS ............................................................................................... 5 CONTENT .................................................................................................... 9 PREFACE.................................................................................................... 12 Pluralistic approach on development: regions and environment TOMASZ MILEJ – SAMIR FELICH: European Cohesion policy: objectives, instruments and reality .............. 15 ZOLTÁN GÁL: The role of the universities in regional development and governance ..... 35 MARTINA MIKRUT – NIHADA MUJIĆ: Ecotourism market segmentation as a basis for ecotourism strategy development ............................................................................................. 61 Regional governance: regional development DUNJA DUIĆ – ÁGOSTON MOHAY – TUNJICA PETRAŠEVIĆ: Representation and possibilities of regions in the European Union ........ 77 IVANA BARKOVIĆ BOJANIĆ – TIBOR KISS – KATARINA MAROŠEVIĆ: Regional development in the Republic of Croatia and Hungary: current situation and future perspectives ............................................................ 101 JELENA DUJMOVIĆ – ANA ĐANIĆ – ESZTER RÓZSÁS: Possibilites to use EU structural funds for regional development in Croatia and Hungary .............................................................................. 127 ATTILA PÁNOVICS – RAJKO ODOBAŠA: The conditions of active and effective NGO participation in regional development policy ................................................................................ 153 Regional governance: local governments ANITA BLAGOJEVIĆ – TÍMEA DRINÓCZI – MIKLÓS KOCSIS: Transparency at local and regional level in Croatia and Hungary ......... 173 BORIS BAKOTA – ADRIÁN FÁBIÁN – BORIS LJUBANOVIĆ: ‘Borderless’ municipal cooperation in Croatia and Hungary ................ 207 ZSOMBOR ERCSEY – EMINA JERKOVIĆ – RENATA PERIĆ – CSABA SZILOVICS: The finances of local and regional self-government units ..................... 221 Regional governance: historical approach ZSUZSANNA PERES – MIRO GARDAŠ – JELENA ROŠKAR: Manors in Baranja County in the 18th and 19th centuries ....................... 255 9

VIŠNJA LACHNER – ZSUZSANNA PERES – JOSIP VRBOŠIĆ: The genesis and evolution of local governments in Croatia and Hungary during the time of the dualism ................................................ 277 MARKO PETRAK – NIKOL ŽIHA – JÁNOS JUSZTINGER: Universal foundations of local laws – example of ‘just price’ (iustum pretium) .................................................................................... 307 Environmental protection: legal protections IVANA TUCAK – ANTAL VISEGRÁDY: The role of lower and higher courts in the interpretation of Hungarian Croatian law ......................................................................... 341 LÁSZLÓ KECSKÉS – KOLOS KOVÁCS – MIRELA ŽUPAN: The polluter pays (?) – Compensation for cross-border environmental damages ......................................................................... 373 GERGELY CZOBOLY – PAULA PORETTI: The procedural aspects of environmental protection in the Hungarian and the Croatian legal system .................................... 397 BARBARA HERCEG PAKŠIĆ– IGOR VULETIĆ – LÁSZLÓ KŐHALMI: Criminal law protection of the environment in Hungary and Croatia in the context of harmonization with the regulation of European Union ....................................................................... 435 IGOR BOJANIĆ: The protection of the environment through criminal law in the Republic of Croatia and its harmonization with European standards .... 451 Specific fields of regional development and environmental protection ERIKA KOVÁCS – MARIO VINKOVIĆ – ZOLTÁN BANKÓ: Posting of workers in Croatia and Hungary ........................................... 473 EDIT KAJTÁR – HELGA ŠPADINA: Discontent of the peregrines: migrants and the right to strike ............... 497 MÁRIA MÁRTON – DUBRAVKA KLASIČEK – NATAŠA LUCIĆ: Civil law frameworks for liability of companies for environmental damages and their influence on regional development .......................... 523 DUBRAVKA AKŠAMOVIĆ – LILLA KIRÁLY: Cross border cooperation of undertakings and its implications on regional development ........................................................................ 545 ANDRÁS KECSKÉS – ZVONIMIR JELINIĆ: Concepts and theories on executive remuneration with Special emphasis on the recent initiatives and developments in the US and EU..575 10

ADRIENNE KOMANOVICS – NIVES MAZUR KUMRIĆ: European regional perspective on environment and human rights ........ 593 LJILJANA SIBER: Information and education in environmental matters: how efficient are they regionally? ......................................................... 623 BILJANA ČINČURAK ERCEG – MELINDA SZAPPANYOS – PÉTER TILK: Cooperation between Croatia and Hungary in the field of environmental protection with special reference to some core obligations regarding the protection of boundary rivers ........................ 641 ZSUZSANNA HORVÁTH – JELENA LEGČEVIĆ: Some measures of greening the economy in the EU and their reflections in regional development ........................................ 669

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Preface The international conference entitled ‘Law – Regions – Development. Legal implications of local and regional development’ was one of the events of the DUNICOP project (Deepening UNIversity Cooperation Osijek – Pécs project; HUHR/1101/2.2.1/005) managed by the two partner law faculties in Pécs and Osijek. DUNICOP is a one-year long common research and curriculum development project between the Universities in Osijek and Pécs in the field of law. The project is cofinanced and supported by the European Union through the HungaryCroatia IPA Cross-border Co-operation Program and by the two participating law faculties. The DUNICOP project is operated in various interrelated areas and through various activities and is regarded as a successful continuation of the previous EUNICOP and SUNICOP projects. The conference, similarly to the previous ones, gave opportunity to Hungarian and Croatian researchers to conduct common research activity and encouraged them to write and present papers together at the conference that was held in Pécs on the 14-15 June 2013. The project made it also possible for researchers to finalize their papers either before or after the conference and adjust them to other papers as well as to the final conclusions of the conference. Attracting the widest audience possible who can benefit from the research results is also one of the objectives of the project. Therefore, the conference papers have been collected and published in three books in Croatian, Hungarian and English. An electronic version of these books can be found on our websites and printed versions of proceedings in English and Croatian are also available. The Faculty of Law, University of Pécs feels much privileged to have been given the opportunity to host the conference and hopes that cooperation will not cease, but will be continued either at the institutional or personal level. Pécs – Osijek, 17 October, 2013 the editors

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Tomasz Milej* Samir Felich** European Cohesion Policy: objectives, instruments and reality I. Legal origin of cohesion policy in the European Union Economic and social cohesion is an expression of solidarity between the Member States and regions of the European Union. 1 This is, at first glance, a simple explanation of the economic, social and territorial cohesion policy. It points to the inherent goal of the European community, which is also, but not only, to be attained by means of the cohesion policy of the European Union. This goal is a unified and equal Europe based on equality and solidarity between Member States and regions. According to Article 3(2) TEU, the Union is committed to a ‘highly competitive social market economy, aiming at full employment and social progress’. The concept of social market economy stemming from Germany and attributed to Ludwig Erhard is interestingly not enshrined in the German constitution. Given the unambiguous articulation of this commitment, one could expect that there is some sort of social policy led by the European Union. This does not however seem to be the case. Social policy remains within the competence of the member states. It has been suggested, that that due to the missing European demos, it is not possible to make reasonable social policy choices on the supranational level.2 On this basis, one may ask whether the EU may discharge its commitment to the social market economy in a situation in which there is lack of activity of EU organs in the field of social policy. If the said commitment is to be taken seriously, the Union may not just rely on the member states. It must itself take some sort of action. One may thus ask whether cohesion policy may fill this gap. Is cohesion policy the social policy of the European Union? Another issue, which will be explored in

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Dr. Tomasz Milej, LL.M, PhD, assistant professor, Institute for Eastern European Law, Faculty of Law, University of Cologne, [email protected]  ** Dipl.-Jur. Samir Felich, research associate, Institute for Eastern European Law, Faculty of Law, University of Cologne, [email protected]  1 Glossary of the EU, available at http://europa.eu/legislation_summaries/glossary/economic_social_cohesion_en.htm.  2 H.-J. Wagener and T. Eger, Europäische Integration. Wirtschaft und Recht. Geschichte und Politik (München, Vahlen 2009) p. 559. 

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this paper, is the regional dimension of cohesion policy. What is regional about cohesion policy? 1. The first nuance of cohesion policy in the Treaty of Rome Not surprisingly, the earliest origin for all following instances of what can be summarized as cohesion policy of the European Union can be found in the preamble of the Treaty of Rome. Yet at this time, cohesion policy was mentioned only in an open and inconclusive manner which had a long way to go before it was complemented by more specific regulations. The treaty proclaimed an honorable goal in the preamble, that is ensure the economic and social progress of their States by common action to eliminate the barriers which divide Europe and through that to strengthen the unity of their [the member states] economies and to ensure their harmonious development by reducing the differences existing between the various regions and the backwardness of the less favored regions. However, the treaty itself lacked specific provisions on how the EC could contribute to the development of those ‘less favored regions’. Neither did it provide for any common action to foster such development. Nevertheless, some Articles took up the issue of reducing the differences among various regions, even if between the lines. Some reference to regional disparities and possible measures can be found in the treaty provisions dealing with the Common Agricultural Policy (just to mention the European Agricultural Guidance and Guarantee Fund established in 1964),3 the European Investment Bank, and the European Social Fund (ESF). The latter, even already established by the Treaty of Rome in Article 123, was at this time a quite modest instrument designed to help regulate the European capability of labor, to combat unemployment and social exclusion. Its rise to one of the three main structural funds in the field of the cohesion policy took a number of reforms. The European Agricultural Guidance and Guarantee Fund (EAGGF) was part of the structural funds until 2007 when it was replaced by the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD).4 From this time on, they have been accounted

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Regulation (EEC) No. 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy. 4 Council Regulation (EC) No. 1290/2005 of 21 June 2005 on the financing of the common agricultural policy.

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for under the Common Agricultural Policy and no longer under the structural funds. The fact that the issue of helping the poorer regions to catch up with the wealthier was dealt with so reluctantly could be explained by three factors occurring in the relevant time period. 5 First, the original six member states that created the European Community were a (economically) homogeneous association of countries with an understanding of regional policy as an internal issue.6 Even about ten years later in 1969 it was still expressed that ‘[...] regional policy is clearly the concern of the public authorities in the member states. The measures it involves fall directly under the political, cultural, administrative, sociological and budgetary organisation of the States. Regional policy forms an integral part of the system of internal balances on what the State is based’.7

Second, it was believed that the integration itself and the promotion of inter-regional trade would remove regional disparities and start a process of harmonization between the regions on its own.8 Third, it has to be considered that certain expectations were vested in the capacity of public investment banks to support growth in underdeveloped regions. In this context, it should be mentioned that the foundation of the World Bank took place precisely in that period of time and in addition, the European Investment Bank (EIB) was established as early as by the Treaty of Rome. However, as for the EIB, it should be noted that it was not the European Commission as a community autonomous organ, but the member states, as shareholders of the European Investment Bank, which had a final say on grants for projects and loans.9 The concurrence of these factors might explain the reluctance towards explicit provisions in the Treaty of Rome at that time, even if the states did realize that some form of support for the less favored regions was 5

G. P. Manzella and C. Mendez, The turning points of EU cohesion policy. Working Paper in the context of the Barca Report (Brussels 2009) p. 5; see J. Lackenbauer, Equity, Efficiency, and Perspectives for cohesion policy in the enlarged European Union (Bamberg, BERG 2006) p. 19. 6 Manzella and Mendez, op. cit. n. 5, at p. 5. 7 Commission of the European Communities (1969) A Regional Policy for the Community, COM(69)950, 15 October 1969, Brussels, p. 13. 8 J. Lackenbauer, op. cit. n. 5. at p. 19. 9 Manzella and Mendez, op. cit. n. 5, at p. 6.

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necessary. However, they preferred to take a very cautious approach in this regard. 2. From Rome to Lisbon An explicit treaty provision, which declared the strengthening of economic, social and territorial cohesion as a policy objective of the European Community, was added to the treaty as late as 1987 by the Single European Act (SEA), the first major revision of the Treaty of Rome. Yet, also in earlier stages of European integration, the European Commission was well aware of the need to take appropriate measures to strengthen the development of less favored or less developed regions. In its report from 1964, the Commission pointed out that for various reasons, there were many régions défavorisées within the European Community and that the member states had a different approach towards handling their regional problems and development. 10 On numerous occasions, the European Commission underscored that this disequilibrium might also detrimentally affect the better developed regions.11 Nonetheless, the member states were quite unwilling to heed the suggestions of the European Commission. A real and substantive progress in the field of regional policy was reached by the reform of the ESF in 1971, 12 the launch of agricultural structures reform from 197213and the expansion of the possibilities of the European Investment Bank to finance its own measures of regional development by

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European Commision, Rapport de groupes d’experts sur La politique régionale dans la Communauté économique européene (Brussels 1964) p. 17-27. 11 European Commision, Rapport de groupes d’experts sur La politique régionale dans la Communauté économique européene, loc. cit. n. 10, at p. 24: ‘Ces déséquilibres [...] portent préjudice directement ou indirectement non seulement aux régions défavorisées, mais aussi aux régions les plus avancées’; see Resolutions of European Parliament of 9 February 1959 (Resolution Van Campen), of 2 June 1960 (Resolution Motte), of 22 January 1964 (Resolution Birckelbach), Commission of the European Communities (1965); First Communication of the European Commission on Regional Policy in the European Community, SEC(65)1170; Commission of the European Communities (1969), A Regional Policy for the Community, COM(69)950, 15 October 1969, Brussels; see also Manzella and Mendez, op. cit. n. 5, at p. 7. 12 71/66/EEC Council Decision of 1 February 1971 on the reform of the European Social Fund. 13 Council Directives, 72/159, 72/160, 72/161.

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empowering the European Commission to contract loans for the purpose of promoting investment within the community.14 At the Paris Summit in 1972 and 1974, as a result of the economic crises and the enlargement of the community in 1973 (Denmark, Ireland and the United Kingdom), the leaders of the member states decided to coordinate their regional policies establishing a committee on regional policy and a community-funded regional development fund in 1975.15 The European Development Fund (ERDF) thus came into being and, since then, it constitutes the second of the three main structural funds in the field of cohesion policy. However, as aforementioned, the legal basis for cohesion policy and the establishment of the structural funds was missing from European primary law until the adoption of the SEA. For this reason, at that time, Articles 145 and 235 EEC were invoked as legal bases for the establishment of the committee on regional policy and the ERDF. 16 Moreover, the ERDF was not a true instrument for regional development of the Commission. It was more upon the member states and their governments to bargain regarding the quota of financial support from the community budget and project financing under their own regional policies.17 The following southern enlargement (Greece 1981, Spain & Portugal 1986) increased the number of less favored regions in the community and the regional disparities became an aggravated problem. In this situation, the claims of the economically weaker member states to extend the community’s regional policy efforts were advanced more vigorously. However, at the same time, the different and not coordinated mechanisms of the existing financial development programs prevented the effective use and positive impact of the different funds. Therefore, a comprehensive redesign of the community structural policy appeared necessary.18 14

78/870/EEC Council Decision of 16 October 1978 empowering the Commission to contract loans for the purpose of promoting investment within the Community. 15 75/185/EEC Council Decision of 18 March 1975 setting up a Regional Policy Committee; Regulation (EEC) No 724/75 of the Council of 18 March 1975 establishing a European Regional Development Fund. 16 See 75/185/EEC Council Decision, Regulation (EEC) No 724/75 of the Council. 17 Lackenbauer, op. cit. n. 5, at p. 20. 18 A. Putler, ‘AEUV Art. 174 (ex-Art. 158 EGV), Ziele der Strukturpolitik; benachteiligte Gebiete’, in C. Calliess and M. Ruffert, Hrsg., EUV/AEUV, Das Verfassungsrecht der Europäischen Union mit Europäischer Grundretchtecharta, Kommentar (München, C. H. Beck 2011).

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The first steps on this route where made in the first half of the 1980s. The changes included a revision of the ERDF, an overall enhanced role for regional development programs, for example by widening the scope of eligible infrastructure expenditures, and a simplification of the administrative process.19 Additionally, the Commission was tasked with periodically reporting on the social and economic situation, and the progress and impact of measures taken in the regions to which it also had the chance to ‘submit proposals for community regional policy guidelines and priorities’. 20 One could notice a shift from a member state controlled model, where the Commission acted as a mere redistribution institution of the funds, towards a model controlled by community policies and the Commission.21 The real major step in this direction was the adoption of SEA in 1986. It not only set the objective for a single European market, but also established a primary statutory source for cohesion policy which was becoming increasingly important. Article 23 of the SEA added the Title V ‘Economic and Social Cohesion’ with Articles 130a to 130e as ancestors of Title XVIII, Articles 174 to 178 of the consolidated version of the Treaty on the Functioning of the European Union (TFEU) in its current version. The tenor of the treaty amendment by the SEA was not subjected to any major overhaul until the present day. Some minor amendments were introduced by the treaties of Maastricht, Amsterdam and Nice. Only the amendments made by the treaty of Lisbon were more significant. With this legal basis in force, the Commission could start to reform its community policies towards a structural policy with a real economic impact that would build the desirable cohesion in the European Community. The proposal of the Commission, 22 which was later

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Manzella and Mendez, op. cit. n. 5, at p. 12. Council Regulation (EEC) No 1787/84 of 19th June 1984, on the European Regional Development Fund. 21 Bulletin of the European Communities, Supplement 4/85. Programme of the Commission for 1985. Statement by Jacques Delors, President of the Commission, to the European Parliament and his reply to the ensuring debate, Strasbourg, 12 March 1985, p. 15, para. 15. 22 EC Commission, Bulletin of the European Communities Supplement 1/87, The Single Act: A new frontier for Europe Communication from the Commission [COM(81)100] to the Council, 15 February 1987. 20

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implemented through a council regulation, targeted five objectives and tasks of the structural funds.23 Objective 1 meant ‘promoting the development and structural adjustment of the regions whose development is lagging behind’. Objective 2 aimed at ‘converting the regions, frontier regions or parts of regions (including employment areas and urban communities) seriously affected by industrial decline’. Objective 3 referred to ‘combating longterm unemployment’. Objective 4 targeted ‘facilitating the occupational integration of young people’. Objective 5 was intended to reform the common agricultural policy by ‘speeding up the adjustment of agricultural structures’ [Objective 5 (a)] and ‘promoting the development of rural areas’ [Objective 5 (b)]. The Structural Funds EAGGF, ESF and ERDF were assigned to attain these goals, each according to the specific provisions governing its operations. All three structural funds were tasked to assist Objective 1 (ERDF, ESF, EAGGF), whereas the support for regions affected by industrial decline (Objective 2) attributed to the ERDF and the ESF. Both Objective 3 and 4 were limited to promotion by the ESF, while Objective 5(a) should be fostered by the EAGGF Guidance Section and Objective 5(b) could use the full power of all the structural funds (EAGGF, ESF, ERDF).24 By virtue of the same regulation, the Council laid down rules for funding eligibility concerning three out of five of these objectives. The eligibility for regions to fall under Objective 1 was based on an average GDP per person less the 75% of the community average in the last three years. The eligibility for regions within Objective 2 was based on three factors, ‘(a) the average rate of unemployment recorded over the last three years must have been above the Community average; (b) the percentage share of industrial employment in total employment must have equaled or exceeded the Community average in any reference year from 1975 onwards; (c) there must have been an observable fall in industrial employment

23

Council Regulation (EEC) No 2052/88 of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments. 24 EC Commission, Bulletin of the European Communities Supplement 1/87.

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compared with the reference year chosen in accordance with point’.25

Eligibility for Objective 5(b) was based on ‘(a) high share of agricultural employment in total employment; (b) level of agricultural income, notably as expressed in terms of agricultural value added by agricultural work unit (AWU); (c) low level of socio-economic development assessed on the basis of gross domestic product per inhabitant. Assessment of the eligibility of areas according to the above three criteria shall take into account socio-economic parameters which indicate the seriousness of the general situation in the areas concerned, and how it is developing’.26

Coordination between the structural funds, the EIB, and other financial instruments to stimulate these objectives was later reinforced by Council Regulation (EEC) No 4253/88 of 19 December 1988.27 The focus on these five objectives and the fact of having guidelines and regulations based on a statutory source marked a milestone in European cohesion policy. Later, these objectives were supplemented by Objective 6 ‘to promote the development and structural adjustment of regions with an extremely low population density’.28 The most recent structural fund was added after entry into force of the Treaty of Maastricht in 1992. The Cohesion Fund was established by a Council Regulation on the 16 May 1994 on the basis of Article 130d TEU. 29 The idea was to create an instrument for Ireland, Portugal, Spain, and Greece to help these Member States out of a dilemma created by the Maastricht fiscal convergence criteria. On one hand, they were required to meet the economic and monetary union criteria, but on the other hand they had to ensure development of infrastructure, trans25

Ibid. Council Regulation (EEC) No 4253/88 of 19 December 1988, laying down provisions for implementing Regulation (EEC) No 2052/88 as regards coordination of the activities of the different Structural Funds between themselves and with the operations of the European Investment Bank and the other existing financial instruments. 27 EC Commission, Bulletin of the European Communities Supplement 1/87. 28 Treaty of Accession of Austria, Finland and Sweden (1994), OJ C 241, 29.8.1994. 29 Council Regulation (EC) No 1164/94 of 16 May 1994 establishing a Cohesion Fund. 26

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European transport networks, and environmental protection. The essential investments in these areas were hardly reconcilable with the budgetary austerity necessary to enter the monetary union. The appropriate level of public investment was to be attained via assistance by the Cohesion Fund. Accordingly, the objectives of the Cohesion Fund were focused on environmental protection and transport infrastructure. The main feature of the Cohesion Fund is the fact that only member states and not the regions are eligible for the funding. Criteria for this eligibility included, first, gross national product (GNP) below 90% of the European Union average and, second, a program leading to the fulfillment of the conditions of economic convergence as set out in Article 104c of the Treaty. 30 Today, a similar regulation is incorporated into Article 177 TFEU as the Fund shall provide a financial contribution to projects in the fields of environment and transEuropean networks in the area of transport infrastructure with the purpose of strengthening the economic and social cohesion in the European Union. 31 The fund is financing inter-regional transport, infrastructure, and environmental protection in 13 countries [Czech Republic, Estonia, Greece, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Portugal, Slovenia, Slovakia, Spain (eligible on a transitional basis)] 32 whose per capita GDP is less than 90% of the EU average. Although the member states and not regions are eligible for support under the Cohesion Fund, the development of infrastructure has a potential to positively affect both the state as a whole and its particular regions. Financial aids from the Cohesion Fund do help to accomplish major infrastructural projects in the beneficiary countries such as construction of bridges and ring roads, improvement of railway networks, expansion of ports and airports, supplying large towns with drinking water, processing waste water, evacuating solid waste, cleaning rivers, and many more.33 Assistance to the cohesion member states in developing their infrastructure (the new member states from Eastern 30

Council Regulation (EC) No 1164/94. Council Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealing Regulation (EC) No 1164/94. 32 2006/596/EC Commission Decision of 4 August 2006 drawing up the list of Member States eligible for funding from the Cohesion Fund for the period 20072013. 33 ‘The Cohesion Fund, A boost for European solidarity’, 14 Inforegio panorama (2004). 31

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Europe in particular) is not a charity of the wealthier member states. It is necessary to maintain and build up economic, social, and territorial cohesion as goal of a functioning European Union which brings macroeconomic benefits for everybody. Although the treaties of Amsterdam and Nice did not bring about any extraordinary changes to the EU primary law foundations of cohesion policy, the policy itself did undergo considerable reforms during the decades of the 1990s and 2000s. First, the objectives were redefined and renamed to adjust them to the respective programming periods. The reform for the 2000-2006 programming period included considerable changes. The first change aimed to improve the effectiveness of structural measures by reducing the number of objectives from seven during the previous period (1994-1999) to three objectives for the 20002006 period.34 The new objectives focused on ‘promoting the development and structural adjustment of regions whose development is lagging behind’ (Objective 1), ‘supporting the economic and social conversion of areas facing structural difficulties’ (Objective 2) and finally, ‘supporting the adaptation and modernization of policies and systems of education, training and employment. This objective shall provide financial assistance outside the regions covered by Objective 1 and provide a policy frame of reference for all measures to promote human resources in a national territory without prejudice to the specific features of each region’ (Objective 3).35

Second, the implementation was decentralized, passing the main responsibility for management, monitoring, evaluation, and control down to competent member state authorities responsible for the respective program. Third, the requirements for the program content and its implementation were simplified. The decentralization and simplification involved new regulations, designed to reinforce the control and effectiveness of expenditures by reviewing evaluation, monitoring and reporting.36 This can be seen as step back to the initial 34

Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds. 35 Loc. cit. n. 33. 36 Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations; Council Regulation

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member states based quotas bargaining model as opposed to the community based model. II. Cohesion policy under the consolidated version of the Treaty on the Functioning of the European Union (TFEU) The treaty of Lisbon eventually added the ‘territorial’ dimension, providing a basis for broadening the scope of the cohesion policy. Article 174(1) TFEU contains a general provision on the structural policy which addresses the EU cohesion objective articulated in Article 3(3) subpara. 3 TEU. Accordingly, the cohesion policy is aimed not just at strengthening the economic ties between the member states. By virtue of article 174 TFEU, the Union is obliged to promote the economic, social and territorial cohesion thus contribution to an overall harmonious development. In addition, by virtue of Article 175 TFEU, the member states are also obliged to coordinate their economic policies with each other and implement the Unions cohesion policies in a way to attain the objectives set out for the Union in Article 174 TFEU. Articles 175-178 TFEU concretize the general provision of article 174 TFEU and contain the necessary statutory source for appropriate and necessary actions by the Union institutions. The last reform for the period 2007-2013 was marked by increasing the added value of community cohesion policy, by another concentration and simplification of the structural funds. 37 For that purpose, former Objectives 1-3 were changed to the new objectives: convergence,

(EC) No 1263/1999 of 21 June 1999 on the Financial Instrument for Fisheries Guidance; Regulation (EC) No 1783/1999 of the European Parliament and of the Council of 12 July 1999 on the European Regional Development Fund; Regulation (EC) No 1784/1999 of the European Parliament and of the Council of 12 July 1999 on the European Social Fund. 37 Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 on the European Regional Development Fund and repealing Regulation (EC) No 1783/1999; Regulation (EC) No 1081/2006 of The European Parliament and of the Council of 5 July 2006 on the European Social Fund and repealing Regulation (EC) No 1784/1999; Regulation (EC) No 1082/2006 of the European Parliament and of the Council of 5 July 2006 on a European grouping of territorial cooperation (EGTC); Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999; Council Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealing Regulation (EC) No 1164/94.

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regional competitiveness and employment, and European territorial cooperation.38 Convergence aims at reducing regional disparities in Europe by helping those regions whose GDP is less than 75% of the European Union to catch up with the average regions. A ‘phasing out’ support until 2013 is offered for the regions which, as a result of the eastern enlargement of the European Union, overstepped the 75% mark due to the fact that the average GDP of the European Union has fallen with the accession of the newest member countries. Convergence is financed by all three structural funds (ERDF, ESF and the Cohesion Fund). It is the focus of the cohesion policy, as the European Union is spending €283.3bn which is 81.5% of total structural fund budget. The resources for the ERDF and ESF funds are 75,5% or 189.604.890.409€ out of the Convergence objective funding and the Cohesion Fund receives 24,51% or 61.558.243.811€ out of the Convergence objective funding (both figures include resources for transitional ‘phase out’ support in the respective fund).39 Regional Competitiveness and Employment aims at creating jobs by promoting competitiveness and making the regions more attractive to businesses and investors. All regions in Europe that do not fall under the Convergence objective are eligible for funding under the objective Regional Competitiveness and Employment. By supporting the wealthier regions to come into terms with their last drawbacks, it is intended to create a kick-off effect for all parts of the European Union. These regions who ‘phase out’ of the Convergence objective receive extra funding for ‘phasing in’ this new objective. Regional Competitiveness and Employment is financed by the ERDF and the ESF with a budget of €55bn, which is 16% of the total structural fund budget.40 European territorial cooperation aims at uniting the European Union and promoting cross-border cooperation between regions and countries. The eligible regions are, as a general rule, regions within 150 km radius

38

Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 on the European Regional Development Fund and repealing Regulation (EC) No 1783/1999. 39 Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999. 40 Council Regulation (EC) No 1083/2006.

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from the border and they are listed by the Commission. 41 European territorial cooperation is supported solely by the ERDF and has a budget of €8.7bn which represents not more than 2.5% of the total structural fund budget.42 As the cohesion policies underwent considerable expansion, the budget share spent on the structural funds and cohesion policy grew accordingly. With nearly no remarkable financial means in the beginning (1950s), the budget grew to 10% of the Community budget in 1975. The steady rise reached about one third of the Community budget in 1990s and is currently stable around 36% of the EU budget.43 For the period of 2007-2013 the structural funds had a total capacity of 308.041.000.000€. 44 On the other hand, the budget for the Common Agricultural Policy (CAP) has massively decreased from over 70% in 1975 to about 40% of the community budget in 2013.45 These developments must be looked at against the background of the relation between the total expenditure by the EU budget and the Union’s GDP. As compared to budgets in national states, the percentage of the GDP spent via the EU-budget is dramatically low. According to the new multiannual financial framework (MFF) it should be 1% of the GDP which is a reduction as compared to the MFF of 2006-2013. 46 It is virtually the same level as in 1970, which was 0.96%.47 Amongst the OECD-states, there is no state spending less than 30% of the GDP via central budget; in 2006 Hungary was spending 51.9%.48 III. Cohesion Policy in the new programming period According to the new multiannual financial framework as adopted by the Council in February 2013, there should be only two aims pursued by 41

2006/769/EC Commission Decision of 31 October 2006 drawing up the list of regions and areas eligible for funding from the European Regional Development Fund under the cross-border and transnational strands of the European territorial cooperation objective for the period 2007 to 2013 42 Council Regulation (EC) No 1083/2006. 43 Lackenbauer, op. cit. n. 5, at pp. 24-25; for 2013 budget see http://ec.europa.eu/budget/figures/2013/2013_en.cfm. 44 Council Regulation (EC) No 1083/2006. 45 Council Regulation (EC) No 1083/2006. 46 Conclusions of the European Council 7/8 February 2013 on Multiannual Financial Framework, EUCO 37/13, para. 9. 47 Wagener and Eger, op. cit. n. 2, at p. 494. 48 Wagener and Eger, op. cit. n. 2, at p. 495.

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the cohesion policy: economic growth and the creation of jobs.49 It is intended to match the Europe 2020 strategic agenda, assuming a smart, sustainable and inclusive growth. According to the aforementioned agenda paper, the inclusive growth means that the benefits of this growth ‘spread to all parts of the Union, including the outermost regions, thus strengthening territorial cohesion’.50 It is further declared that the economic, social and territorial cohesion shall remain at the heart of the Europe 2020 strategy, with cohesion and structural funds being the key mechanisms to achieve these priorities. 51 The goal of territorial cooperation has been upheld, but the financial resources allocated to it are of marginal significance. The most controversial issue is the total amount of expenditure on economic, social and territorial cohesion which the Council intends to reduce by 30bn (8,4%), even if the share for the cohesion states shall increase.52 Another important aspect which is mentioned in the Council conclusions regarding the MFF is that of macro-economic conditionality. It is laid down that the allocation of funds should be made conditional on ‘sound economic policies’.53 This is contested within the EP.54 IV. The assessment of cohesion policy The cohesion policy was not introduced as a tool of wealth redistribution, not even an instrument to promote growth in backward regions but as a shock absorber.55 It responds to the fact that the benefits of the common market are aggregated within the core regions. This is 49

Conclusions of the European Council on Multiannual Financial Framework, para. 20. 50 Communication from the Commission Europe 2020. A strategy for smart, sustainable and inclusive growth COM(2010)2020, final, Brussels, 3.3.2010 (hereinafter Europe 2020) p. 17. 51 Europe 2020, at p. 21. 52 Conclusions of the European Council on Multiannual Financial Framework, para. 6. 53 Conclusions of the European Council on Multiannual Financial Framework, para. 77. 54 See Opinion of the EP Committee on Regional Development, 27.9.2012, 2011/0177(APP), para. H. 55 R. Riedel, ‘European Union‘s Cohesion after the Enlargement: a View from Central Europe’, 12 Yearbook of Polish European Studies (2009) p. 83; Wagener and Eger, op. cit. n. 2, at p. 579.

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European Cohesion Policy: objectives, instruments and reality

partly at the expense of peripheral regions.56 Based on this assumption, the cohesion and regional policy were initially conceived as a compensation for the peripheral regions for their participation in the common market. This shock absorber function is particularly important in a situation, in which the Member States located in the periphery must meet the convergence criteria and keep budget spending low. As the participation in the common market requires enhanced investment in the peripheral regions, the budgetary austerity in everything but not affluent societies is likely to contribute to the gap increase between core and periphery. As European integration was deepened, the scope of the cohesion policy was broadened, just to mention its social and territorial dimension. The strategy Europe 2020 also contains very far-reaching objectives, such as the aforementioned objective of ‘spreading wealth’. The cohesion guidelines for the programming period 2006-2013 refer broadly to welfare state standards, including declarations, which can be regarded as a credo of expansive social policy.57 Yet, the progressive broadening of the cohesion policy’s scope did not go along with a proportionately substantial increase of financial resources. Even if the share of the expenditure for the cohesion policy within the EU budget increased, the share of the EC/EU expenditure in relation to the Union’s GDP remained stable and low. In Central and Eastern Europe, this situation may have contributed to a certain degree of misperception with regard to the role of the structural funds. For the new member states, the access to the funds was one of the main incentives to join the EU,58 perhaps even more important than the access to the common market. There seems to be not much awareness that the common market is the key element of 56

Wagener and Eger, op. cit. n. 2, p. 578 and p. 579. See Council Decision (EC) No 2006/702 on Community strategic guidelines on cohesion which set out the goal of ensuring ‘inclusive labour markets, enhance work attractiveness, and make work pay for job-seekers, including disadvantaged people, and the inactive’. Further, it was stated that ‘[an] important priority should be to strengthen active and preventive labour market measures to overcome obstacles to entering, or remaining in, the labour market and to promote mobility for job seekers, the unemployed and inactive, older workers as well as those at risk of becoming unemployed, with particular attention to low-skilled workers. Action should focus on the provision of personalised services, including job search assistance, job placement and training to adjust the skills of job-seekers and employees to the needs of local labour markets.’ 58 See Riedel, loc. cit. n. 55, at p. 84. 57

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European integration whereas the structural funds only have an auxiliary function. On the other hand, in the region concerned, prior to the accession to the EU, infrastructural investment spending was relatively low in comparison to the ‘old’ Union. Therefore the cohesion policy is still perceived as a very important factor contributing to the modernization of the new member states. Economical stock-taking generally suggests that the cohesion and regional policy may help to reduce disparities between the core and the periphery within the European common market taken as a whole, but not within the peripheral member states.59 On the contrary, there is some evidence that peripheral regional subsidizing may even increase the economic distance to major urban areas in the given member state.60 It is also suggested that regional subsidies can likewise have detrimental effects if they do not form a part of a coherent national regional policy.61 For the use of funds to succeed, good governance and well-targeted investment based on clear strategy are also essential.62 V. Implementation of the cohesion policy There are five principles guiding the cohesion policy spending: 63 the additionality principle (according to which EU funds should be additional to national funds, rather than replacing them), the principle of concentration on regional and structural needs, the principle of partnership between governments, regions and various social groups, the programming principle and the environmental protection principle. The implementation of the cohesion policy, as it stands today, in particular with regard to the cohesion states, responds to some extent to the aforementioned diagnosis of its risks. The crucial step was made in 1988, when the idea of granting subsidies from the structural funds to support single projects was abandoned and switched to funding based on 59 J. Bachtler and G. Gorzelak, ‘Reforming EU cohesion policy. A reappraisal of the performace of the Structural Funds’, 28 Policy Studies (2007) p. 311 and p. 319. 60 Ibid. 61 Bachtler and Gorzelak, loc. cit. n. 59, at p. 316; see also Wagener and Eger, op. cit. n. 2, at p. 588. 62 Bachtler and Gorzelak, loc. cit. n. 59, at p. 317. 63 For a summary overview see C. Archer, The European Union (London, Routledge 2008) p. 89; see also C. Eggers, ‘EU-Arbeitsweisevertrag Art. 177, Ziele und Organisation der Strukturfonds; Neuordnung; Kohäsionsfonds’, in E. Grabnitz and M. Hilf, eds., Das Recht der Europäischen Union (München, C. H. Beck 2011) para. 35 et seq.

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planning and operational projects.64 The allocation of funds is decided on the basis of a national strategic reference framework which for its part must be in conformity with the community strategic guidelines for cohesion.65 A comparative view on the operational projects run in the cohesion states within the programming period 2006-2013 reveals a holistic, centralized approach. Accordingly, in Poland, around 75% of the total amount allocated to this country is spent on centrally steered operational programs and only 25% is distributed among 16 regional programs (every region runs one regional program). This allocation has been decided on the basis of a study of needs conducted in the national strategic reference framework. A quite similar situation occurs in Hungary, where some 23% of the available funds are spent by the regions. In Romania, which is a highly centralized country anyway, 100% of the structural funds are administered from Bucharest. On the other hand, in Germany, there is only one operational program run by the federal authorities (Transport infrastructure in the Federal Republic of Germany) amounting to 5.8% of the total funds, the remaining part being allocated to the Länder. The strongly decentralized allocation of funds is also a case of France, notwithstanding the fact that France, as opposed to Germany, is not a federal state. A high level of decentralization is accordingly not an essential condition for a decentralized administration of funds. In regard to the real impact of the regional policy in the core EU regions, it should not be overestimated, to say the least. For example, the total of EU structural funds invested in North Rhine-Westphalia within the regional operational program in the programming period 2007-2013 amounted to €1,28bn,66 whereas the total budgetary expenditure of the budget of this Bundesland was €59.9bn just in one year (2013).67 EU financed investment is not even half of the budget deficit which is to be €3.4bn. Comparing these figures with the budget expenditures in the cohesion states is quite difficult, as they are mostly not decentralized to such a wide extent. Accordingly, in 2013, budget expenditure of the

64

Eggers, loc. cit. n. 63, at para. 39; Wagener and Eger, op. cit. n. 2, at p. 583. Eggers, loc. cit. n. 63, at para. 53-55. 66 All figures available at INFOREGIO web portal of the European Commission: http://ec.europa.eu/regional_policy/indexes/in_your_country_en.cfm. 67 Information of the Ministry of Finance, 20 March 2013, available at http://www.fm.nrw.de/. 65

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Polish region Lower Silesia amounts to some €450mn only,68 whereas the region’s largest city (Wrocław) is projected to spend twice as much this year.69 Under these circumstances, the sum of €1,24bn allocated for the regional operational program for Lower Silesia is of enormous significance, although it is virtually the same amount of money as in the case of North Rhine-Westphalia. VI. Conclusions The existence of the EU regional policy depends on what operational programs are adopted, and the adoption of operational programs depends on the level of decentralization. As a rule, the most ample realization of the regional policy takes place in wealthier, decentralized states. However, paradoxically, the significance of EU funded projects is low there. In the cohesion states, even an allocation of a modest share of EU funds may trigger an empowerment of regions which, in the long term, can even shift a balance of power within a member state. There cannot be any doubt, though, that the cohesion policy aimed at narrowing the gap between rich and poor states within the EU is a policy led by the central government. As for now, the structural funds do not work as a tool for the redistribution of wealth. Accordingly, there is no social policy within the European Union. And if there is no social policy at the European level, can the Union still claim that the commitment to social market economy and social progress is not taken seriously? The scarce resources which the states make available for the Union do not predestinate it as a social policy actor. A difficulty to agree on common social policy choices resulting from the lack of a European demos was mentioned as a reason for the lack of the EU-run social policy. However, there seems to be a more serious problem, which can be characterized as a deficit of trust. This could be demonstrated by the conditionality requirement, mentioned in the Council conclusions and opposed by the EP. Apparently, the main contributor states do not have confidence that the funds will be spent efficiently by the cohesion states, or, to put it simply, will not be wasted. There is no confidence that the control mechanisms within the cohesion 68 Information of the regional Marshall Office, 22 November 2012, available at http://www.umwd.dolnyslask.pl/. 69 Information of the city council, 28 December 2012, available at http://bip.um.wroc.pl/.

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states, for example the parliamentary control of government spending, work properly. It is quite a different question, whether these objections are substantiated. Is some cases they are, in other cases, and perhaps even in the most cases, they are not. The mere fact that the adequate level of confidence is missing, constitutes an obstacle for any form of EU-run social policy. The lacking confidence can only be counterbalanced by the parliamentary scrutiny on the European level, which is hampered by the broadly discussed democratic deficit and which may be thus perceived as not trustworthy either. Cohesion policy can best be described as public investment policy.70 As such, it is beneficial not only for the backward regions, but also for the capital from wealthier member states, given the fact that many infrastructure projects are implemented by the companies from the ‘old’ union. Further, it should be remembered that symmetrical regional development may also adversely affect the wealthier regions, which was repeatedly reported by the European Commission, for the first time as early as 1964.71 Finally, the present account suggests that the European Union is far from being a federation. The conditionality principle fits better into regulations on humanitarian aid or financial loans than to a redistribution system within federally organized polity. Only significant progress regards mutual confidence and democratic legitimacy of the EU institutions may put the EU in the position to effectively maintain a social policy on its own. Until this progress is achieved, expectations towards the structural funds should not be set too high.

70

It has been suggested that this is precisely what the social policy of the EU is about, see Wagener and Eger, op. cit. n. 2, at p. 565, with further references. Labeling measures which do not aim at redistribution of wealth and which traditionally have not been conceived as social policy as ‘social policy’ is not very convincing. 71 This aspect has been recently reaffirmed by Opinion of EP Committee on Regional Development, at para. J (‘both beneficiaries and net contributors benefit from the Cohesion Policy’).

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Zoltán Gál* The role of universities in regional development and governance Towards the model of regionally engaged service-universities I. Introduction The focus of this paper is on the role of mid-range universities in the development of peripheral regions in the context of the university engagement literature. In many regions, modern universities are viewed as the core of the knowledge base, acting as key elements of innovation systems, supporting science and innovation-based regional growth.1 The so-called regional engagement of universities has developed through an evolutionary process during the last 50 years. Traditionally, universities primarily focused on teaching and, to some extent, research, while university education was elite education. In many European countries, due to the gradual expansion of the higher education sector, the appearance of mass education and lifelong learning as well as the declining share of grants provided by the state in the 1970s and 1980s, competition between universities has become stronger, and they have been forced to perform their research activities on a profit-oriented basis. Universities have had to seek alternative sources of funding from business, industry, civil society and non-national state actors.2 Also, public funding has increasingly become competitive funding, and research activities often require public-private partnership. This is called the ‘entrepreneurial turn’, or the servicing mission of universities.3 Later, in addition to teaching and research, universities started to adopt a third mission or developmental role, which is mainly described as ‘community service’ by the US literature, and ‘regional engagement’ in

* Dr. Zoltán Gál, PhD, associate professor, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, Pécs, [email protected] 1 R. Huggins and F. Kitagawa, Devolution and Knowledge Transfer from Universities: Perspectives from Scotland and Wales, Discussion Paper: Impact of Higher Education Institutions on Regional Economies Initiative (2009). 2 M. Harloe and B. Perry, ‘Universities, localities and regional development: The emergence of the ‘Mode 2 University’? International Journal of Urban and Regional Research Vol. 28 No. 1 (2004) pp. 212-223. 3 P. Inman and H.G. Schuetze, The community engagement and service mission of universities (NIACE Publications, Leicester 2010); A. Tjeldvoll, ‘A Service University in Scandinavia?’ 9 Studies in Comparative and International Education (1997).

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Europe,4 or ‘regional innovation organization’ or ‘academic entrepreneurialism’.5 The university engagement literature, while accepting that universities may well undertake knowledge generative activities, proposes that they adopt a broader, developmental focus on adapting their core functions of teaching and research, as well as community service, to addressing regional needs.6 With regard to human capital formation, the university engagement literature focuses on the importance of regionally-focused teaching7, which is manifested in a stronger focus on regional student recruitment and graduate retention; the development of programmes that address skills required by regional industries, particularly, small and medium-sized enterprises; and the localization of learning processes, for example, through workplace-based learning and regional projects. This third (developmental and engagement) mission is a somewhat indefinite concept which refers to the economic development role motivated by the social responsibility of the institutions. According to Harloe and Perry,8 the third role of universities in relation to subnational (EU regions) economies and societies has been widely justified in terms of the development of the knowledge economy and the significance of the regions in economic development. This ‘regionalization of the economy’ strengthens the links between universities and clusters of firms and regionally-based supply chains of small and medium sized firms.9 Knowledge and innovation have become increasingly important sources of economic development, and there is a pressure from government, businesses and communities for universities to align their core functions with regional needs.10

4 B.A. Holland, ‘Toward a definition and characterization of the engaged university’, 3 Metropolitan Universities (2001) pp. 20-29. 5 OECD, The Response of Higher Education Institutions to Regional Needs, (CERI/IMHE/DG(96)10/REVI) (Centre for Educational Research and Innovation, OECD, Paris 1999). 6 P. Chatterton and J. Goddard, ‘The response of higher education institutions to regional needs’ 35 European Journal of Education (2000) pp. 475-496. 7 Harloe and Perry, loc. cit. n. 2. 8 Chrys Gunasekara, ‘The Third Role of Australian Universities in Human Capital Formation’, 26(3) Journal of Higher Education Policy and Management (2004) pp. 329-343. 9 Ibid.; Huggins and Kitagawa, op. cit. n. 1, at p. 22. 10 Chatterton and Goddard, loc. cit. n. 6, at p. 482.

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Huggins and Kitagawa11 argue that, although universities emphasize their international orientation, they are embedded in their region and add to the area’s economic and social strength through e.g. preserving local jobs, diversifying the local economy and attracting inward investors. Among many others, these authors state that economic development and the welfare of regions can be enhanced through universities’ various forms of engagement with the local economy, including research, infrastructure development, education, effective industry-university partnerships, technological innovation and community development. This paper tries to adapt the models of universities’ regional engagement to the case of a peripheral border region in Central and Eastern Europe, the South Transdanubia Region in Hungary. Although the study applies the concept of ‘mid-range university’ to Central and Eastern Europe, the term of mid-ranged universities was borrowed from the study by Wright et al.12, which is focused on mid-range universities and their links with industry in British, Belgian, German and Swedish regions. In the UK, for example, mid-range universities are defined as all universities excepting top universities and new (post-1992) universities. For example, the sample of Wright and co-authors13 included universities teaching between 8 thousand and 33 thousand students and employing between 700 and 2500 full-time researchers. However, in the UK and other European countries there are many first-ranked universities located in non-metropolitan regions, which is not the case in Central and Eastern Europe. As a consequence of the spatial concentration of top universities in Central and Eastern European countries almost exclusively in metropolitan areas, mid-range universities are most often located in nonmetropolitan regions.14 The article examines to what extent regional mid-range universities may enhance economic development in a lagging area and to what extent European models of the third role of universities may be relevant in the particular region. The hypothesis is that universities’ developmental role is much weaker in peripheral regions where mostly mid-range 11

Huggins and Kitagawa, op. cit. n. 1, at p. 22. M. Wright, et al., ‘Mid-range universities’ linkages with industry: Knowledge types and the role of intermediaries’, 37 Research Policy (2008) pp. 1205-1223. 13 Wright et al., ibid at p. 1215. 14 Z. Gál and P. Ptáček, ‘The role of mid-range universities in knowledge transfer: the case of non-metropolitan regions in Central Eastern Europe’, 19.9. European Planning Studies (2011) pp. 1669-1690. 12

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universities are present, and the traditional models designed for firstranked universities located in prosperous economic environment are not directly applicable due to e.g. the different sectoral structure of the economy and the different nature of the knowledge supply and demand.15 The paper is structured as follows. After summarizing the literature on the contribution of universities to regional development, the paper reviews the most important theoretical considerations including the developmental role (the third mission) of universities and the positions of higher education institutions (HEI) in territorial governance. It presents the main features in which mid-range universities in peripheral regions are different from top universities located mainly in metropolitan areas. Using case studies from Central and Eastern Europe the paper concludes that it is not only the position of universities in their collaboration with the business sector that is different but also their role in the innovation system, and there is a need for much more comprehensive and complex economic policies initiating the support of the university sector and starting the development of high tech industries, small-scale enterprises and constructing regional advantage by strengthening the community involvement of universities. The following section focuses on the specificities of mid-range universities in the South Transdanubian region. Following this, case studies are presented from the region which may reveal the position of the universities in the system of regional and cross-border development. Finally, some concluding considerations are included in the last section. II. University engagement: the role of universities in regional development and governance The literature on the engaged university also focuses on the third role of universities in regional development, but it differs from the triple helix model in its emphasis on the responses of universities that adopted a stronger regional focus in their teaching and research missions.16 The evolution of engaged universities ran parallel to the regionalization of the economy or ‘the rise of the regions’, which means that the salience of the regional scale is increasing and the regulatory capacity of the

15 16

Gál and Ptáček, loc. cit. n. 14, at p. 1687. Holland, loc. cit. n. 4; Chatterton and Goddard, loc. cit. n. 6.

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nation-state declines.17 Essentially, universities’ regional engagement means meeting the various needs of the modern client population, such as flexible structures for lifelong learning created by changing skill demands, more locally based education as public maintenance support for students declines, greater links between research and teaching, and more engagement with the end users of research. Also, regional institutions including universities have gained more and more importance in the governance of the regional economy; therefore, universities as important parts of the regional networks have become more embedded in their regional environment. The engaged university approach encompasses a range of mechanisms by which universities engage with their regions. The literature on the responsive university places less emphasis on academic entrepreneurialism, compared with the triple helix model, and more on community service. Here, community service means that the university is a community-based institution serving the needs of the society in a local area or region.18 Unlike in the US, European higher education institutions are highly dependent on state support. However, from the point of view of their regions, they function as autonomous institutions and have control over the nature of teaching and research, since they are under national regulations and raise the majority of their funding from national sources. Therefore, regional engagement is not inherent to these institutions. There is an external pressure from government, businesses and communities for universities to align their core functions with regional needs. Universities also need to diversify sources of funding due to the rising relative costs of education, the intensifying competition for students and research contracts in conjunction with fiscal and demographic pressures, in order to maintain their academic standing and in some cases, to even survive. Taking a specific approach, Srinivas and Viljamaa19 analyzed the process and motives of becoming an engaged university in the context of institutional change and institutional interactions. 17

P. Arbo and P. Benneworth, Understanding the Regional Contribution of Higher Education Institutions: A Literature Review, OECD Education Working Papers, No. 9. (OECD Publishing 2007). 18 Chatterton and Goddard, loc. cit. n. 6, at p. 482. 19 S. Srinivas and K. Viljamaa, ‘Emergence of Economic Institutions: Analysing the Third Role of Universities in Turku, Finland’, 42.3 Regional Studies (2008) pp. 323341.

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University engagement can incorporate several activities. Together with the shift in the higher education sector from elite education to mass education and the prevalence of life-long learning, there is a requirement for universities to educate graduates in compliance with the needs of the regional labor market. This means that universities provide an interface between graduates and the labor market in their region. According to Chatterton and Goddard,20 engaged universities provide flexible structures for lifelong learning created by changing skill demands as well as more locally based education as public maintenance support for students declines. In the field of research, universities’ engagement means greater links between research and teaching; and more engagement with the end users of research, e.g. in the form of regional research networks and joint research with participants from the academia and the industry. Since university researchers are conducted mainly in international academic networks, universities are able to channel international knowledge to regional users. A considerable part of the literature, e.g. Varga21 builds on the notion that knowledge generation becomes localized and agglomeration effects are crucial for the spillover effects to work. Evidence proves the importance of proximity in supporting universityindustry joint research efforts and other collaborations.22 Universities engage with their regions not only in the fields of education and research but also in regional institutions and governance systems. This is the consequence of the previously mentioned phenomenon that state activity is becoming increasingly regionalized in Europe, and administrative and political decisions are increasingly made at the regional level. For this reason, institutional capacities have to be built and extended at the sub-national level and sub-national policy networks have to be created. As important regional actors, universities are part of these governance networks.23 Individuals in the academic sphere take an active role in civil society: 20

Chatterton and Goddard, loc. cit. n. 6, at p. 483. A. Varga, ed., Universities, Knowledge Transfer and Regional Development: Geography, Entrepreneurship and Policy (London-New York, Edward Elgar Publishers 2009). 22 J. Drucker and H. Goldstein, ‘Assessing the Regional Economic Development Impacts of Universities: A Review of Current Approaches’, 1 International Regional Science Review (2007) pp. 26-46. 23 See Arbo and Benneworth, op. cit. n. 17. 21

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‘Academic staff, either in formal or informal capacities, can act as regional animators through representation on outside bodies ranging from school governing boards and local authorities to local cultural organizations and development agencies. Higher education institutions also act as intermediaries in the regional economy by providing, for example, commentary and analysis for the media. As such, they make an indirect contribution to the social and cultural basis of effective democratic governance, and ultimately, economic success through the activities of autonomous academics.’24

In addition, the community service of universities often takes the form of developing the social and cultural infrastructure of the region in accordance with the specific needs of university students and academics. Arbo and Benneworth25 review the numerous aspects through which higher education institutions are embedded in their regions. These are primarily non-economic aspects including regional policy, national and regional innovation systems, human capital development and governance systems. They concentrate on the numerous interfaces through which the university and its region may be linked. The impact of local universities is not restricted to the technical sphere, but may spread into wider social and economic effects on their region. Commitment to social and organizational innovation is gaining more and more importance as main barriers emerge from the social sides even if universities and regions try to introduce adopted technologies. Social and organizational innovation in a wider context means the generation and implementation of new ideas and creativity in order to overcome the social barriers of innovation and it requires ongoing social interactions.26 Innovators face many social and managerial barriers which inhibit innovations. Among others, inadequate funding, risk avoidance, incorrect measures and forecasts, lack of partnerships and deficiencies in collaboration are the most important social and managerial constraints. Social innovations facilitate the formation of new institutions, networks

24

Chatterton and Goddard, loc. cit. n. 6, at p. 481 See Arbo and Benneworth, op. cit. n. 17. 26 M.D. Mumford and P. Moertl, ‘Cases of social innovation: Lessons from two innovations in the 20th century’, 15 Creativity Research Journal (2003) pp. 261-266. 25

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and the building up of social capital through collective learning processes.27 III. Universities in peripheral regions Many of the empirical studies on universities’ regional developmental role and economic impact derive their findings from investigating large, world-class research universities located in a highly developed economic environment. Nevertheless, Wright and the co-authors28 argue that those findings are not necessarily relevant for all universities, especially for mid-range universities. The main features of mid-range regional universities are that they are located in secondary cities where the regional demand for innovation is moderate, the density of contacts is much lower and possible spillover effects emerge more sparsely; they may not possess a base of world-class research; academics work in a smaller local scientific community in which they interact with the industry; and the creation of spin-off companies is different in its nature.29 According to Gál and Ptáček,30 the model of university engagement can be adopted by those mid-range universities in the less developed East European regions which do not have the critical mass to engage in world-class scientific research, but instead these universities can focus on other than high-technology innovation. In the less developed, reindustrializing Central and Eastern European regions with substantial human capital resources, benefiting from the relocation of European industry, but with not yet fully developed knowledge creation and transfer capacities, this special situation forces mid-range universities to take on new roles in contrast with other countries/regions where university-state-industry-citizen relations have perhaps had longer time frames to evolve. This new role means a stronger regional engagement in medium-tech innovations and in social and organizational innovation.

27

K. Kitagawa, ‘Universities and Regional Advantage: Higher Education and Innovation Policies in English Regions’, 6 European Planning Studies (2004) pp. 835-852. 28 Wright, et al., loc. cit. n. 12, at p. 1217. 29 Wright, et al., loc. cit. n. 12, at p. 1219. 30 Gál and Ptáček, loc. cit. n. 14, at p. 1677.

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In their paper, Huggins and Johnston31 compare the economic impact of universities of different types, and they conclude that there are significant differences in the wealth generated by universities according to their regional location and the type of institution. According to their results, universities in more competitive regions are generally more productive than those located in less competitive regions, and more traditional universities are also generally more productive than newer ones in the UK. Furthermore, the overall economic and innovation performance of regions in the UK is generally inversely related to their dependence on the universities located within their boundaries. This means that weaker regions tend to be more dependent on their universities for income and innovation, but often these universities underperform in comparison with similar institutions in more competitive regions. Although knowledge commercialization activity might be a source of productivity advantage for universities, markets for knowledge in less competitive regions appear to be weak on the demand side. Huggins and Johnston32 emphasize that the regional environment may also influence the actions of institutions, since a relatively strong knowledge-generating university in a relatively weak region may have a greater propensity to engage with firms in other regions. In weak regions the private economy’s strength may be insufficient and small and medium-sized enterprises may be unable to exploit the benefits of engagement with the universities. In the long term this may result in a leakage of knowledge from the home region, which further deepens the disparities in regional competitiveness. Benneworth and Hospers33 focus on how peripheral regions which are functionally distant from core economic activities can reposition themselves in the knowledge economy. They argue that such regions are internally fragmented, which reduces their capacity to attract and embed external investment to reduce this distance, and upgrade their status among other regions within a technical division of labor. In regions with sub-optimal innovation systems, it is very hard to lay down the 31

R. Huggins and A. Johnston, ‘The economic and innovation contribution of universities: a regional perspective’, 27 Environment and Planning C: Government and Policy (2009) pp. 1088-1106. 32 Huggins and Johnston, loc. cit. n. 31, at p. 1095. 33 P. Benneworth and G-J. Hospers, ‘Urban competitiveness in the knowledge economy: Universities as new planning animateurs’, 67 Progress in Planning (2007) pp. 105-127.

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foundations of a sustainable local economic growth. According to Benneworth and Hospers,34 a governance failure is in the root of this problem, namely networking deficiencies. They list a range of internal and external barriers that less-favored regions face when building local networks which exploit the knowledge spillovers of external investments. Internal barriers include a lack of local institutional capacity, a lack of critical mass or substantive outcome, the lack of entrepreneurial resources, and a mismatch between the science base and knowledge users. External barriers to building and integrating local networks are the unfavorable economic specialization (to low-tech industries), externally imposed barriers to local governance integration, antipathy by external firm owners to local innovation, and a poor external image discouraging potential investors. IV. Role of mid-range universities in Central and Eastern Europe 1. Limits of the economic impact of universities in Central and Eastern Europe There is a substantial spatial concentration of top universities almost exclusively in metropolitan areas in Central and Eastern European countries. Mid-range universities are most often located in nonmetropolitan regions or, to put it another way, most of the universities outside the capital cities can be classified as mid-range, where the R&D potential and the ‘density of contacts’ are much lower and possible spillover effects emerge more sparsely. For this very reason, mid-range universities represent the keystones of regional innovation systems and are often crucial parts of regional innovation strategies.35 During the transition in the 1990s universities were mostly facing pressure from the state to increase their educational role. The system of financing in this decade did not motivate universities to search for new contacts and collaboration with industry and it was much easier to survive through the rising numbers of students. The gradual ‘marketization’ of the higher education sector started after 2000 as a result of several factors. In general, it was the recognition of knowledge as a source of economic growth. In the process of marketization, universities started to use standard tools borrowed from Western Europe, but the result could not be the same because of the 34 35

Benneworth and Hospers, loc. cit. n. 33, at p. 115. Gál and Ptáček, loc. cit. n. 14, at p. 1675.

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The role of universities in regional development and governance

differences in history and the different position of universities in the regional or national innovation systems. EU accession and the possibility to use EU development funds (such as cohesion funds) for building knowledge infrastructure induced an active approach from the side of universities. The establishment of the supporting innovation infrastructure (scientific parks, scientific incubators) was further developed at the universities thanks to the role of intermediaries (mostly technology transfer offices or R&D services) which focused, on the one hand, on the building of ties with industry and, on the other hand, on gaining EU funds for building infrastructure. In that period, the trend of incoming foreign direct investments shifted from low-paid routine labor towards investments requiring a skilled and university educated labor force. In this sense multinational companies have a pioneering role in the knowledge spillover from universities to industry.36 The regional impact of these processes is leading to the ongoing polarization of the R&D potential between metropolitan and non-metropolitan areas; that is, R&D resources and research capacities are more and more unevenly distributed among the regions.37 This has resulted in that mid-range universities remain the keystones of regional innovation infrastructure outside the metropolitan regions, furthermore, their role even increases. Sectoral research institutes set up in the socialist era and sponsored by the industry and relevant ministries were mostly closed down after the regime shift, and so their role was taken over by local universities. In sum, the role of mid-range universities in CEE countries is weaker than in more developed countries of the EU and the process of adaptation to the new social and economic conditions started substantially later than in Western Europe. At the same time mid-range universities located mostly outside the metropolitan areas have to face similar problems and disadvantages as their western counterparts, such

36

P. Ptáček, ‘The Role of Foreign Direct Investment (FDI) in Establishing of Knowledge Economy in the Czech Republic: The Case of Knowledge Intensive Business Services’, in Z. Ziolo and T. Rachwal, eds., Problems in the Formation of Industrial Spatial Structures and their Surrounding (Warszawa-Krakow, Prace Komisji Geografii Przemyslu Polskiego Towarzystwa Geograficznego 2009) pp. 2230. 37 Z. Gál, ‘The New Tool for Economic Growth: Role of Innovation in the Transformation and Regional Development of Hungary’, 2 Geographia Polonica (2005) pp. 31-52

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as less intensive university-industry contacts, weak local R&D networks etc. (see Table 1). It is often argued that universities are able to generate economic effects based on knowledge spillovers and innovation transfers to businesses.38 The differences between the advanced regions of metropolitan agglomerations and the most backward regions are emphasized in the relationship between universities and their regions.39 This means that in most of the non-metropolitan Central and Eastern European regions, where the regional innovation systems and the university-industry linkages are still weak, the role of universities in local development has to be revised and, consequently, the economic impact of universities cannot be unambiguously extended to transition economies. For example, a Hungarian study concluded that the knowledge-producing ability of the academic sector did not increase the knowledgeexploitation ability of the local business sector; moreover, both universities and the less developed local economy may be responsible for several hindering factors of intraregional knowledge transfer between universities and industries.40 Similarly, Bajmóczy and Lukovics41 showed that university researches for local economic development may be an outstanding instrument in case of advanced regions but not necessarily for the less developed regions where the lack of an appropriate industrial base is one of the main constraints. They measured the contribution of Hungarian universities to regional economic and innovation performance between 1998 and 2004. The results showed that the presence of universities does not affect the growth rate of the gross value added per capita or the gross tax base per tax payer. Therefore, general economic effects of universities and 38

H. Etzkowitz, et al., ‘The Future of the University, the University of the Future: Evolution of Ivory Tower to Entrepreneurial Paradigm’, 2 Research Policy (2000) pp. 313-330. 39 A. Varga, et al., ‘Research notes and comments: Geographic and sectoral characteristics of academic knowledge externalities’, 4 Papers in Regional Science (2000) pp. 435-443. 40 Z. Gál and L. Csonka, Specific analysis on the regional dimension of investment in research – case study report and database on the South Transdanubian region (Hungary) (Brussels, ERAWATCH 2007) p. 59. 41 Z. Bajmóczy and M. Lukovics, ‘Subregional Economic and Innovation Contribution of Hungarian Universities’, in Z. Bajmóczy and I. Lengyel, eds., Regional Competitiveness, Innovation and Environment (Szeged, JATE 2009) pp. 142-161.

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related R&D investments are hardly visible in transition economies, such as many Central and Eastern European regions. Our case study area, South Transdanubia, is a less developed reindustrializing region with lower knowledge absorption capacity and with an underdeveloped research and technology development sector relative to the national average (Figure 1). Basic conditions for change in the technology sphere are rather unfavorable. Its regional GERD was 23M € in 2007, which is only 2.5% of Hungary’s total GERD. The region has one of the poorest R&D capacities in Hungary (in 2007 with only 4.1 per cent of the Hungarian R&D employees). The region has large public RTD infrastructure mainly based on the two universities42 absorbing more than four fifths of the regional GERD, therefore the HEI43 sector plays a dominant role in R&D performance (Table 1). Unlike the public RTD sector, the visibility and performance of the business sector is very low, even in comparison with the national average. The RTD creation of the business sector in Southern Transdanubia is limited (3.4 M € BERD in 2004). Universities are the major employers of RTD personnel. The orientation of the knowledge creation activity of the region is based, to a great extent, on the profile of its universities, which have the strongest potential in life science (biotech) research and they also have a good reputation with measurable RTD outputs in laser physics, environmental and animal cytology research.44 However, the strongest barrier in South Transdanubia is the clear mismatch between the knowledge-production specialization of the universities and the economic structure of the region. The main findings of this section are based on an empirical survey which listed 92 time-series indicators covering 20 different EU regions, including South Transdanubia, commissioned by ERAWATCH S.A. in Brussels.45 This research was focused on the constraints of knowledge transfers in the case of mid-range universities in the less developed transition regions with traditional, non-research universities. The survey 42

University of Pécs (est. 1367) and University of Kaposvár (est. 2000). Higher Education Institute. 44 The relative strength of biotech research base is demonstrated by its large share of total input-output indicators and also by the increase of RTD spending in this field (64.8m in 2004). In addition, the 11 university spin-offs in the biotech sector are tightly connected to the Medical School (MS), which has 48 employees and produces a turnover of €3 million (2004). 45 Gál and Csonka, op. cit. n. 40, at p. 59. 43

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on South Transdanubia identified the main reasons for the poorer performance in RTD transfers. On the one hand, there is a mismatch between the economic and research specializations, which is combined with the low share of the business sector in RTD investment, the high share of the traditional lower tech sectors, the small size of local SMEs and the consequent lack of resources to invest into RTD and absorb its results. On the other hand, there is a lack of demand for research results from larger (mainly foreign-owned) companies and, to some extent, the necessary knowledge supply for certain sectors and in certain disciplines is also lacking in the region.46 It should be also accepted that these regions are specialized in activities that are not highly research intensive, therefore increased R&D expenditures cannot be easily exploited by local businesses or utilized by HEIs. In these situations, setting up a new research base that is not linked to the needs of the regional economy could be like building ‘cathedrals in the desert’ as they are unlikely to be able to develop knowledge transfer and spillovers with local economic actors, particularly for high-tech industries.47 2. Engaged universities – the South Transdanubian case Universities can act as regional actors, developing stronger partnerships between universities and the regional development agencies, emphasizing the key role of higher education in regional development. The policy approaches and activities in CEE regions almost exclusively concentrated only on the first two missions of universities, and the notion of regional engagement did not constitute the part of university strategies up until very recently. Two compelling endogenous and exogenous factors have contributed to the recognition of the importance of a stronger regional engagement of universities recently. Firstly, the accumulated knowledge and the experiences of staff at the higher education institutions provide expertise in various fields, and this can be a very effective way of accelerating progress of collaboration through 46

A few large enterprises in high tech electronics have been engaged in high-tech activities, but their influence on the local RTD sector is considered to be marginal, as they usually rely on the in-house RTD activities of their parent companies importing the technology from outside the region. 47 Z. Gál, ‘The role of research universities in regional innovation: The case of Southern Transdanubia, Hungary’, in N. Longworth and M. Osborne, eds., Perspectives on Learning Cities and Regions: Policy Practice and Participation (Leicester 2010) pp. 84-106., T. Dory, RTD policy approaches in different types of European regions (JRC and ERAWATCH Report 2008).

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the exploitation of economic and social interactions transmitted by spinoffs and other university based consultants within the newly formed regional networks.48 Secondly, exogenous pressures are extorted by new market demands and policy goals which envisage a real regional and social prosperity that integrates knowledge, social and human development. This exogenous factor facilitates connectivity among different institutions including universities and other stakeholders and will provide not only better funding opportunities but also a collective learning platform for social interactions. In the following sub-sections we present two case studies the authors participated in, from South Transdanubia, which show the new types of developmental roles and community engagement that local universites can undertake in a peripheral, border region in order to revitalize the economy of a lagging, de-industrialized area. The first one presents an example of an urban development project based on campus (property) development in conjunction with the European Capital of Culture 2010 project, and a city development strategy relating to the health and environmental sectors; the second one provides insights into the building of a common cross-border knowledge region in the framework of university partnership. It is characteristic of both case studies that the strategies are strongly reliant on the contribution of the local academic sector. 2.1. University engagement in the South Transdanubia Region: The European Capital of Culture 2010 Project and the so-called ‘growth pole’ development programmes In the case study presented in this section we focus on the biggest city of the South Transdanubia Region and its university. The city of Pécs has adopted two strategies with strong collaboration of the University of Pécs to mobilise endogenous resources and enhance its competitiveness (the University of Pécs is the oldest university in Hungary, which was established in 1367). Higher education has been a strong driver of economic restructuring; in fact, it was probably the university which saved the city of Pécs from the depression experienced by other Central 48

A. Schmidt, ‘Towards the common Education Area in the Visegrad region – in the University of Pécs’, in N. Styczynska, ed., Towards a common education area in the Visegrad region. New modalities of co-operation within international relations and European studies programmes (Kraków, Wydawnictwo Promo 2012) pp. 65-74.

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and Eastern European industrial regions after the change of the political regime – even if it could not fully prevent the disadvantageous processes. In the 1990s and the 2000s, Pécs, the city with 2000 years of history dating back to the Roman and medieval times, has lost most of its economic potential which was built on coal and uranium mining and several industrial plants. Due to its peripheral situation and the adverse effects of the war in the former Yugoslavia, there are insufficient foreign direct investments in the region and there is a lack of local economic strength. In an economic environment characterized by a decreasing industrial sector, the city’s cultural, educational and market services give a chance for the economy to rise again. Cultural issues first appeared markedly in local development policy in the city development strategy of 1995, which envisaged a growth path built on knowledgebased economy, services and innovation where innovative tourism and ‘cultural industry’ get priority.49 After the integration of several local universities and a number of smaller higher education facilities in 2000, the University of Pécs, being the oldest university of Hungary (est. 1367), has become one of the largest employers in the city and even the region. Although R&D outputs in engineering and natural sciences and the university-industry links are limited, the presence of students and employees has had a multiplier effect on the economy of Pécs, mainly in the field of rented flats, consumer products and services and culture. Of course, the university has contributed to the urban ambience and real estate site development of Pécs as well. One of the strategies is a comprehensive initiative which aims to reconfigure the economy of the city to utilize the heritage and cultural basis in the framework of a singular large project of the European Capital of Culture 2010 to generate growth. The European Capital of Culture 2010 project tries to capitalize on the idea of culture-led urban regeneration and has helped Pécs to reinvent itself through culture. The University of Pécs played a major role in organizing the European Capital of Culture project, which became the largest ever exercise of community service of the local university, being heavily involved not only in the cultural events but also in the development of the new cultural, community and educational functions of the city’s newly built cultural quarter. The project is the 49

G. Lux, ‘From Industrial Periphery to Cultural Capital? Restructuring and Institution-Building in Pécs’, in J. Suchacek and J. Petersen, eds., Developments in Minor Cities: Institutions Matter (Ostrava, Technical University Press 2010) pp. 103-119.

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Zsolnay Cultural Quarter: built on the site of the eponymous ceramics factory, which was originally established as a mixture of production facility, artist’s colony and living environment for the owner and his family, it intends to endow a disused area with new cultural, community and educational functions serving as the new training site for the university’s Faculty of Music and Visual Arts. Benneworths50 describe the university’s urban development role and the major factors conditioning the success of co-operation for both the city and the university in detail. The strong university engagement in the city’s development was also reflected in the development pole programme51 called ‘Pécs – Pole of Quality of Life’ which has three pillars: health industry, environmental industry and cultural industry. The main features of this programme are introduced by – among others – Lux52 as follows: - Similarly to the European Capital of Culture 2010 project, the ‘growth pole’ programme has also strongly involved the contribution of the University of Pécs during the planning period as well as in the governance and the implementation, especially within the health industry pillar and the environmental industry pillar (Figure 2). - ‘Health industry’ covers health services relying on the university’s Faculty of Medicine and its clinics, which have achieved outstanding results in treating movement-related disorders. Several industrial functions are connected to these 50

P. Benneworth, et al., ‘Building Localized Interactions Between Universities and Cities Through University Spatial Development’, 10 European Planning Studies (2010) pp. 1611-1629. 51 The development pole based type of development appeared in France and its main characteristic is that the central motivator of the development process is the university. The overall aim of the pole programme is to promote the formation of internationally competitive clusters; specialization on high value-added, innovative activities; strong cooperation primarily between businesses and additionally between universities and local governments; to strengthen the regions through the increasing competitiveness and better business environment of the pole cities. The expected results (for the period between 2007 and 2013) include that the businesses – through clustering and the cooperation with the academic and university sector – reach the critical size which is necessary for being competitive in Europe and pole cities emerge as centers which are able to strengthen and sustain competitiveness for both themselves and their surrounding regions on an international scale. 52 Lux, loc. cit. n. 49, at p. 108.

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-

-

services including the manufacturing of medical and prosthetic equipment; and other services in the field of human recreation. The ‘Cultural industry’ pillar of the programme is expected to benefit from the European Capital of Culture 2010 programme, and this returns to the idea of promoting the urban culture of Pécs as a complex, innovative product. The ‘Environmental industry’ pillar is both narrower and wider than the ‘quality of life’ concept: it might be helpful in fostering a cleaner, more attractive environment, but the actual elements of the development project have a prioritized focus on alternative energy sources.

2.2. University engagement through the Hungarian–Croatian crossborder programmes: lessons from the ‘South Pannonia’ knowledge region Another initiative under the umbrella of universities’ engagement is the Hungarian-Croatian IPA cross-border project titled ‘Regional Universities as Generators of a Transnational Knowledge Region: UNIREG IMPULSE’ started in the ‘South Pannonia’ region with the aim of developing a knowledge region based on the universities’ active regional engagement – their third mission – mediating organizational and social innovation by strengthening networked relations between universities and regional actors (Figure 3). The project initiates networking relations in three different fields: rural development; strategic and regional planning; environment and sustainable local energy systems. It provides a vast scope for enhancing the role of universities in regional, economic development and knowledge dissemination in the region. Besides the mainly bilateral educational and research relations between the region’s universities there is a need for building channels of local knowledge flows towards their lagging, underprivileged hinterlands also in those fields where not primarily high-tech oriented R&D activities are demanded. Instead, the specific regional development impacts of the universities and their social and organizational innovations, as well as the knowledge generation and transfer through the contacts with local actors contribute most to the local development.53 53

In the project the social-organizational innovation mediated by the academic sector was serving for strengthening the social and organizational foundations of the local economic development and focused on the development of human resources in

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The role of universities in regional development and governance

The central problem of regional development in cross-border areas is that these regions are not only peripheral but also below the average in terms of economic development in both countries. The neighboring border regions have a common interest in sustaining open borders in order to reveal and exploit the potential advantages of cooperation in the fields of education and economic and social activities which should be customized to the region’s geographical specificities. Effectively it was after the millennium that the local governments along the two sides of the border started to make contacts with each other thereby linking almost the entire border region and they have undertaken activities which influence progress in their environment. The various interregional, organizational, sectoral etc. applications and their implementation resulted in the formation of mutual ideas and ambitions, as well as the creation of institutions on both sides of the border that are able to engage in mutual tasks on the basis of value-creating cooperations. The general aim of the project was to motivate a more active regional engagement of the universities – in terms of their third mission – and to create a South Pannonian knowledge region which is based on the knowledge networks transmitting organizational and social innovation through the strengthening of network relations between the universities and the regional actors. The regional academic sector possesses those intellectual capacities through which the cross-border region’s inherent specificities, problems and mutual development perspectives can be envisaged. The project activities included the establishment of a knowledge transfer office as the organizational framework for the implementation of the third role of the local universities, the development of the co-operative knowledge networks and the creation of a knowledge map to serve as a basis for stronger cross-border cooperations between the universities. In this case structural changes and cross-border social dialogues should all be regarded as priorities. Due to the region’s economic, geographic which the different forms of knowledge have a key role. The adult education and professional training courses organized by the universities, the exchange of practical knowledge bound to certain sectoral policies, development priorities, the elaboration of development strategies and practical development programmes (in rural development and in environmental sector) customized to the demands of local society and the universities’ narrow and broad environment are important components in the increased regional engagement of universities.

53

Zoltán Gál

and environmental specificities, the new cross-border knowledge region which extends the innovative capacities of the area should be built on the foundations of regional development instruments and rural economic development opportunities. Our approach assumes that the expansion of the universities’ functions can be interpreted as a social and organizational innovation, while as a result of the project activities; a new co-operation interface emerges between the knowledge sector and the industry which is in accordance with the aims of the project. Dissemination, knowledge maps, joint knowledge transfer office, webpage development and workshops, publications and reports addressing the specific problems of the region help achieve the overall goals of the project while they provide frameworks for analyzing, planning and implementing new communication and co-operation forms in the field of social and organizational innovation. In summary, the main implications of the case studies are as follows: - Higher education has been a strong driver of economic restructuring, and urban development/regeneration of slum districts within the city and contributes to the urban ambience and real estate site development of cities. The University of Pécs has not only played a key role in supporting urban development and regeneration through campus development (Regional Library and Information Centre, Cultural Quarter etc.), but also contributed to the quality of urban governance and to the place branding (external image creation) of the city. These new development sites take part in the development of the new cultural, community and educational functions of the city generated by the university. - The presented Unireg Impulse project called for an active crossborder engagement of the regional universities in order to create a transnational knowledge region through organizational and social innovation and strengthening networked relations between the universities and regional actors. The project was useful, on the one hand, for the regional universities, since it included elements for defining the universities’ growth strategy (third role, social visibility, strategic involvement) and with the active involvement of the relevant regional stakeholders the universities increased their partnership as a potential for future collaborations. On the other hand, the project was useful for 54

The role of universities in regional development and governance

regional and local government bodies, because it provided a synthesis of Hungarian experiences on EU accession and expert guidelines for the transition on a regional level based on the expressed needs. It can be concluded that universities have to be relevant players in the development and evaluation of regional policy that fosters 'new combinations' of partnershipbased, innovation-centered approaches, which maximize the development of human capacities, such as skills and mobility, and the formation of social capital through networking, collective learning and building up trust. V. Conclusions This paper has applied the regional and community engagement literature to the mid-range universities of Central and Eastern Europe and explored the peculiarities and specificities of these mid-range universities facing a number of extra constraints in the less developed CEE regions. After summing up the ways in which universities may contribute to the economic development of their regions and presenting the measurement methodologies and the theoretical considerations, the paper focused on the problem of adapting the literature on peripheral regions with mid-range universities. From the presented theories, the literature on universities’ regional engagement is the most relevant in the context of our article. There are several facilitating and hindering factors concerning the process of becoming a regionally engaged university, and our main lesson is that the whole regional innovation system should be developed in an integrated manner in order to reach this goal. The mentioned constraints impede peripheral, mid-range universities from building linkages to the local economy and developing internationally recognized areas of research excellence, with the associated critical mass, and exploiting the advantages of global knowledge networks. The research has found that not only the position of universities in their collaboration with the business sector but also their role in the innovation system is quite different, which is mainly due to the different development path of the innovation systems and development trajectories in post-communist countries described in the paper. Because of historical path-dependence, mid-range universities, unlike top-universities, are very often located in non-metropolitan regions in CEE countries where the RTD potential and ‘density of 55

Zoltán Gál

contacts’ are much lower and possible spillovers emerge more sparsely than in capital city regions. We argued that in these regions, setting up new university based research directions that are not linked to the needs of the regional economy are unlikely to be able to develop knowledge transfer and spillovers to local economic actors. In a peripheral situation the lack of research capacity in science and engineering RTD can also be a serious obstacle to the modernization of the industrial structure. Universities are looking for contacts out of the regions and their contribution to the regional innovation infrastructure cannot fulfill the possible expectations. Rather, these universities need to take careful strategic decisions to build up those areas and the related intermediaries where they have the scope to make an international impact and also to differentiate investment in those areas where they can make a regional contribution. Economic policy practices suggest that the support of university researches for stimulating local economic development may be an outstanding instrument in case of advanced regions but not necessarily for the less developed CEE regions where the lack of an appropriate industrial base is one of the main constraints. It can also be argued that business-led networks connecting different actors have much higher importance in economically advanced regions while in the less advanced ones universities and public agencies play a more significant role in network building and in catalyzing activities of the key actors. If universities are embedded in a region it has a clear impact upon the intensity and nature of the relationships and, hence, their ability to effect tacit and codified knowledge transfers. Regionally-focused teaching and research are manifest in a stronger focus on regional student recruitment and graduate retention (in order to combat brain drains in R&D), the innovation oriented regional development programs addressing skills required by regional industries and the localization of learning processes. The paper also argues that mid-range universities in the reindustrializing CEE regions have to take on new roles, which means a stronger regional engagement also in medium-tech innovations and in social and organizational innovations. Universities have to be practically relevant in the development and evaluation of regional policy that fosters ‘new combinations’ of partnership-based, innovation-centered approaches, which maximize the development of human capacities such as skills and 56

The role of universities in regional development and governance

mobility, and the formation of social capital through networking, collective learning and building up trust. In the less developed CEE regions there is a need for much more comprehensive and complex economic policies initiating not only the support of the university sector but also the starting of developing high-tech industries, small-scale enterprises and constructing regional advantage with a stronger developmental role and community involvement of universities. This contributes towards the third mission of universities through meeting learning needs of the region. This might be achieved by exchanging knowledge between higher education and the business community or through outreach to local communities to combat social exclusion and to improve cultural understanding. Table 1 Main indicators of mid-range universities in Western Europe and their CEE counterparts54

N students N FTE researchers N FTE technology transfer HERD Mill. Eur N spin-offs Total RSBO Regional GDP (Bn Eur) GRP per capita (Eur)

54

University UP University Notthingham University University of of Pécs Olomouc University of Ghent of Antwerp (Hu) (Cz) Karlsruhe 28,000 22,000 33,000 15,686 21,160 8,029 1051

1158

2500

1401

846

6

7

4

1

3

4

14

19.4

150

83

122

45

11 n.a

7

27 n.a.

unknown

12 23

2 4

6.7

11.2

103.8

316.9

157.3

157.3

6,900

9,600

24,145

29,694

26,194

26,194

Source: by the author and Wright, et al., loc. cit. n. 12.

57

Zoltán Gál Figure 1 Key indicators on Southern Transdanubia’s knowledge base development in comparison to the national average, in percentage55 S outhT rans danubia (D él-Dunántúl) 0

20

40

60

80

100

120

41 43

GE RD

18 17

BE RD 23

27

G OVE R D 113 108 62

HE R D R &D pers onnel, Total

73

20

R &D pers onnel, G overnment

25 31 28

R &D pers onnel, B us ines s 89

107

89 90 36

R &D pers onnel, HE Is HR in S &T P atents

43

88 91 91 90 Y ear 1

S tudents in Tertiary E ducation L ife-L ong L earning

Y ear 2

GERD

55

Source: calculated by the Author based on EUROSTAT and KSH (Hungarian Statistical Office) data. BERD: Business expenditure on Research and Development, GERD: Gross expenditure on Research and Development, HERD: Higher Education expenditure on Research and Development, GOVERD: Government expenditure on Research and Development. The following years were used for BERD, GERD, HERD GOVERD1999, 2003; R&D personnel 1999, 2004; HR 1997, 2004; Patents 1999, 2003 and Lifelong learning 1999, 2004.

58

The role of universities in regional development and governance Figure 2 The system of cluster initiatives and projects in Pécs56

Figure 3 Cross-border areas of Hungary and Croatia covered by the UNIREG IMPULSE project57

56 57

Lux, loc. cit. n. 49, at p. 115 Source: http://www.hu-hr-ipa.com/.

59

Martina Mikrut∗ Nihada Mujić** Ecotourism market segmentation as a basis for ecotourism strategy development I. Ecotourism as a global tourism trend A large number of definitions of ecotourism have been offered in the literature and all of them have in common ‘nature-based’ tourism point of view, but in recent years, those definitions are narrowing toward nature-based but also educative and culturally and environmentally ‘sustainable’. Despite a variety of definitions of ecotourism since its emergence in the 1980s, it is now generally agreed by academics, government and the tourism industry that ecotourism can be identified by three core criteria: nature, learning and sustainability where the sustainability criterion incorporates environmental, social and economic elements and therefore includes criteria referred to specifically in some definitions, such as conservation and community benefits.1 Although ecotourism is seen as a global tourism trend and the economic market recognized the potential of usage words such as ‘eco’ and ‘green’ which will help them in selling almost anything, little is known about the profile of individuals who are either interested in such experiences, or currently driving this apparently lucrative market. II. Segmentation as a basis for strategy development A key component of all marketing programmes is knowing the current or potential target group in order to create customer efficient marketing strategy and operational marketing mix and reach full product, service and communication potential. Attempts to define tourist types have also been called segmentation, classification, and clustering. Identifying distinct tourist types is crucial for the planning, management, and



Martina Mikrut, assistant, Department for methodological-information science, Osijek, [email protected] ** Nihada Mujić, full professor, Department for methodological-information science, Osijek, [email protected] 1 N. Beaumont, ‘The third criterion of ecotourism: are Eco tourists more concerned about sustainability than other tourists?’, 10:2, Journal of Ecotourism (2011) pp. 135-136.

61

Martina Mikrut – Nihada Mujić

marketing of tourism.2 Strategy development of ecotourism promotion might be fostered by identifying the motivational and psychological roots of ecotourism and elaborating appropriate communication strategies for ecotourism advertisement. Such a marketing approach may prove a valuable strategy for ecotourism promotion. This approach would require examining the targets’ needs, motivations, and expectations to gain a better understanding of the elements that can affect tourism-related behaviour.3 Tourist’s characteristics are the key elements of the marketing strategy. These represent the starting point for the identification of service/product qualities that better respond to tourist’s preferences. Communication strategies for promoting ecotourism could be developed on the basis of the target population’s needs, motivations, interests, and expectations, which are the driving forces behind attitudes and behaviours.4 That is why it is very important to apply a segmentation strategy that would identify homogeneous subsets that could be targeted by specifically tailored communication strategies. Segmentation can result with tourist typologies where some of these tourist typologies used today are theoretical in nature, and some have been empirically tested. In countries and regions where ecotourism strategy is not firmly developed yet it is necessary to understand the potential of interest and level of awareness of ecotourism current and potential tourist, which means that for first step it is interesting to measure openness toward ecotourism within general population. III. Tourism segmentation of Croatian citizens This paper investigates understanding and perception of ecotourism of Croatian citizens with the goal of providing market segmentation as the strategic tool to account for heterogeneity among tourists by grouping them into market segments which include members similar to each other and dissimilar to members of other segments based on vacation preferences, identifying ecotourism potential among Croatian as current or potential tourists. Measurement of previous touristic behaviour or future vacations plans was not included on attitude level, only statement about traveling in general, within the country and/or abroad. In order to 2

G. T. Hvenegaard, ‘Using Tourist Typologies for Ecotourism Research’, 1:1 Journal of Ecotourism (2002) p. 7-8. 3 Cini, L. Leone, P. Passafaro, ‘Promoting Ecotourism among Young People: A Segmentation Strategy’, 44 Environment and Behaviour (2012) pp. 87-88. 4 Leone, Passafaro, loc. cit. n. 3, at p. 90.

62

Ecotourism market segmentation as a basis for ecotourism strategy development

measure potential ecotourism segment development, analysis was done using backdate of six research waves through 3 years, 2 waves per year for 2010, 2011 and 2012 on total sample of 12.000 respondents, with core focus on 2012 sample (n=4077) using 2010 and 2011 data only as trend detections regarding traveling habits. Data collection was done using self-completion method, and data set related to vacation preferences was a part of wider research project. Sample was representative for Croatian population aged from 15 to 65 years. Controlled variables were gender, age, and region and settlement type. 1. Methodology overview Selected segment of measurement instrument was consisted of 26 statements plus questions related to socio-demography. Statements were evaluated using predefined answers of ordinal Likert scale (1 to 5). Detailed list of statements is presented in Table 1. Table 1 Statements 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

Companies and people responsible for the pollution of nature should be strictly penalized. For me, the ideal vacation is in well-equipped spa. For vacation I choose destinations that offer special health programs. Going on a vacation is the best time for socializing with family members. Good night life is for me the best way to spend my holidays. I am interested in the news about what is good and what is harmful to health. I am trying to spend the time of my vacation on wild parties and fun. I expect that the vacation place offers various entertainments for the whole family. I like to try new food products that appear in stores. I really enjoy going out to bars, pubs and clubs. I try to protect my health with my lifestyle. I want to spend my vacation in a completely quiet environment. I would give an advantage to the environmental protection even if it causes slower economic growth. If we don't protect the nature human species will soon be found on the edge of survival. It is important for me to learn more about the history of the place I visited. It is important to spend the vacation on a place where the nature is beautiful. On vacation I enjoy the most in beautiful natural landscapes.

63

Martina Mikrut – Nihada Mujić 18. 19. 20. 21. 22. 23. 24. 25. 26.

The behaviour of our society to the nature that we damaged with excessive development must urgently change. The best part of vacation for me is using the wellness treatments. The most important is that I get enough sleep while on vacation. Vacation is the only time when I manage to be with my family. Vacation without getting in touch with genuine nature is not a vacation to me. When I go on vacation all I want is to rest. When on vacation I like to visit night bars and disco clubs. When on vacation I visit cultural heritage places with interest. When on vacation I will try to visit good cultural manifestation or show.

2. Research results Since the study was based on perception and attitudes rather than real behaviour of Croatian inhabitants regarding their leisure time, representative sample was used for state of mind measurement. With the aim of understanding possibilities of transferring opinions into real future behaviour, it was verified how many Croatian residents travel in general, within the country and abroad. When observing traveling in 2012 there were 36% of Croatian inhabitants who said they were traveling within Croatia during their summer or winter vacations (graph 1). This number is rather stable through three years trend, still somewhat lower than previous years (which probably can be explained by recession and lower standard of living). Graph 1 Traveling within Croatia

Significantly lower number of Croatian population is going abroad for holidays (graph 2). It can be expected that large number of collective 64

Ecotourism market segmentation as a basis for ecotourism strategy development

discounts offering several days abroad for large discounts will help retain that number (or even increase) despite hard economic situation. Graph 2 Traveling abroad

As earlier mentioned, further analysis is based on perception and attitudes and not real vacation behaviour so representative sample of Croatian inhabitants was used for detailed statements analysis. Descriptive statistics shows that there is general understanding of nature importance since the highest average grade of agreement was related to statement about penalising nature pollution followed by agreement with statement related to urgent need of changing behaviour toward nature (table 2). Mean result were confirmed by median value. Value that appears most often in a dataset was even higher e. g. highest possible grade. Consistency of responses was reflected in the fact that all statements related to ecology and sustainable development in general were best ranked statements among all, including more individually oriented statements. Nature as important part of ecotourism segment was recognised dimension within Croatian population, but not followed by heritage, history or culture as interesting dimensions of sustainable tourism development.

65

Martina Mikrut – Nihada Mujić Table 2 Statements descriptive statistics Mean Companies and people responsible for the pollution of nature should be strictly penalized. The behaviour of our society to the nature that we damaged with excessive development must urgently change. If we do not protect the nature human species will soon be found on the edge of survival. I would give an advantage to the environmental protection even if it causes slower economic growth. I expect that the vacation place offers various entertainments for the whole family. Going on a vacation is the best time for socializing with family members. It is important to spend the vacation on a place where the nature is beautiful. On vacation I enjoy the most in beautiful natural landscapes. I try to protect my health with my lifestyle. I want to spend my vacation in a completely quiet environment. I am interested in the news about what is good and what is harmful to health. Vacation without getting in touch with genuine nature is not a vacation to me. I try to keep my body in the best possible shape The most important is that I get enough sleep while on vacation. I am interested in alternative methods of improving health

Median

Mode

Std. Deviation

4,12

4

5

1,025

4,08

4

5

1,004

3,93

4

5

1,066

3,86

4

5

1,063

3,86

4

5

1,167

3,76

4

5

1,204

3,74

4

5

1,139

3,74

4

5

1,112

3,47

4

3

1,124

3,44

3

3

1,282

3,42

3

3

1,173

3,38

3

3

1,221

3,32

3

3

1,143

3,10

3

3

1,296

2,92

3

3

1,219

66

Ecotourism market segmentation as a basis for ecotourism strategy development It is important for me to learn more about the history of the place I visited. When on vacation I visit cultural heritage places with interest. When I go on vacation all I want is to rest. When on vacation I will try to visit good cultural manifestation or show. Good night life is for me the best way to spend my holidays. For me, the ideal vacation is in well-equipped spa. For vacation I choose destinations that offer special health programs. The best part of vacation for me is using the wellness treatments. When on vacation I like to visit night bars and disco clubs. I am trying to spend the time of my vacation on wild parties and fun.

2,91

3

3

1,267

2,87

3

3

1,289

2,85

3

3

1,376

2,71

3

3

1,275

2,43

2

1

1,341

2,42

2

1

1,349

2,35

2

1

1,284

2,32

2

1

1,294

2,25

2

1

1,346

2,24

2

1

1,306

On the other hand, lowest average grades were given to activities related to parties, fun, disco etc., but it is partially due to the wide range of age difference with rather small proportion of young people (as in population). Prior to conducting cluster analysis, average grades were tested in relation to demographic value on statements related to ecotourism perception, and rather stable profile was shown, as presented in graph 3.

67

Martina Mikrut – Nihada Mujić Graph 3 Vacation without getting in touch with genuine nature is not a vacation to me

Croatian citizens who agreed with statements regarding positive ecotourism perception were somewhat more female, older than 30 years from different Croatia regions, equally from small and large settlements. But, this is overall profile which is not enabling marketing strategy creation for promoting and communicating with interested population. That is why cluster analysis, statistical techniques that can be applied to create ‘natural’ grouping, was conducted. The analysis resulted in three mayor segments (table 3). Segments are approximately the same sizes, where 379 respondents did not match to any of given segments. Table 3 Final clusters numbers Cluster

1 Segment 2 Segment 3 Segment

Valid Missing

1220 1184 1294 3698 379

Analysis of variance (ANOVA) was used to confirm that there is significant difference between clusters (P-value