Original publication: September 2017
Authors: ISMERI EUROPA: Enrico WOLLEB, (coordination), Andrea NALDINI, (China, Brazil, and conclusions), Andrea CIFFOLILLI, (MERCOSUR)
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European Cohesion Policy and regional development policies in other parts of the world

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The study compares the main features of the EU’s Cohesion Policy with similar policies in other parts of the world. The review focuses on two important emerging countries, China and Brazil, as well as on two international organisations, ASEAN and MERCOSUR. The study makes recommendations to feed into the policy debate concerning the future of the EU Cohesion Policy after 2020.

The analysis is mainly a survey of the relevant institutional and academic literature. The literature review focuses in particular on the institutional framework and multilevel governance, redistribution and geographical targeting of resources, budget, main objectives and implementation systems. To broaden and update the analysis a small number of interviews were carried out with representatives of institutions and experts.

The examined countries and international organizations pursue different regional policies which are not directly comparable to the EU Cohesion Policy. For this reason in the text the expression “Cohesion Policy” refers only to the EU, while “regional policy” or “regional development policy” are used for the other countries/organizations.

China and Brazil – China and Brazil are emerging countries which to a different extent have experienced important economic and social growth in the past two decades. They differ greatly as to size, institutional arrangements, spatial organization and development models. These differences affect their strategic choices but both countries have made an enormous effort to improve economic, social and territorial cohesion in recent years.

Fighting poverty and promoting social cohesion according to a territorial approach are common strategic priorities which have attracted increasing political attention and resources in both countries. This political attention aims to create the pre-conditions for development and competitiveness policies. Behind this effort there is a common need for diminishing disparities between rural and urban areas, which are increasingly less acceptable in the presence of growing levels of income. Environmental sustainability is also an important priority especially in China where some areas are being preserved exclusively for tourism.

In both countries territorial policies for growth and competiveness are based on a broad range of incentives for attracting foreign investments. In China the utilisation of a large range of fiscal, financial and use of soil instruments allows local authorities to adapt competitiveness policies to territorial features. The re-localisation policies, which foster the transfer of activities to the Central provinces, is facilitated by the large Chinese industrial basis. Mutual assistance is a specific instrument for territorial policies that promotes bilateral economic solidarity and technical support between two provinces: one strong “donor” and a weaker “recipient”. In Brazil, the fact that federal regional policy mix is limited to financial instruments makes the definition of an integrated territorial policy difficult. However, the recent changes in the eligibility of the national funds moved the focus to endogenous potential and increased the role of SMEs, local productive systems and disadvantaged border areas.

In these countries territorial development is a consolidated component of national development policies. In addition, in China political stability has led to a constant adaptation of the territorial policies to the national economic strategy. In Brazil the more frequent political changes have generated a stop-and-go process in regional policy and hampered its reform and modernisation. It is difficult to estimate the resources devoted to territorial policies, especially in China, where the scope of regional policy is more fuzzy. In Brazil resources specifically devoted to federal regional policy amount to around 0.5% of GDP, without considering federal fiscal de-contribution and expenditure made by individual states.

China and Brazil adopt a small scale territorial approach in policy implementation and the way areas are targeted. This common approach suggests that great importance is given to the local dimension of development and functional areas are necessary to define consistent and effective interventions. In this respect, the Chinese experience seems more flexible and adaptable, as it can change fiscal rules for a specific and limited area.

The two countries have different governance models for regional policy. China merges regional policy into national development policies and its governance reflects the governance of the whole public expenditure system: largely decentralised in the implementation but strategically oriented from the centre. In Brazil, regional policy is separated from the other development policies, based on specific funds and very centralised; it may be assimilated to a development bank business model. Two reforms for a more decentralised approach have been rejected by Parliament, but there have been significant and positive experiences of multi-level and decentralised governance in anti-poverty and rural development policies.

Regional policy implementation deserves special attention, especially in China, because there competition between local authorities is an important way to promote efficiency and proactive attitudes. This competition pushes policy implementation, but sometimes negatively affects coordination and collaboration between officials. In general, both countries suffer from weak coordination between institutions and the inadequate definition of the roles and the powers of the different actors.

ASEAN and MERCOSUR – ASEAN and MERCOSUR are carrying out their integration processes with different approaches. ASEAN has adopted a gradual and multispeed approach, where bilateral and differentiated agreements prevail; the institutionalisation of ASEAN is limited and just in recent years a more structured organization has been established. In MERCOSUR there is a relatively advanced institutional organization but this does not correspond to an intense integration process while bilateral contrasts often break out.

Despite these different approaches both organizations focus on economic disparities and cohesion. In principle, they recognise that trade and economic integration, their prime objective, cannot occur if disparities are too large and integration benefits are not distributed. The same preoccupation motivated the radical reform of the European Structural Funds in 1989 and the following revisions to make EU enlargements possible.

The specific geo-political features of ASEAN need to be taken into consideration and affect its objectives and organization: the proximity of China, the second largest economy in the world, significantly influences the economic and infrastructural organization of member countries and their association facilitate relationships and exchanges with China. MERCOSUR has to deal with a different context. Even if the US influence on Latina America is significant, differences in the size of the countries and the predominance of Brazil do not facilitate balanced progress.

The regional policies of the two organizations are limited and based on a project approach. The Initiative for ASEAN Integration (IAI) is the main policy instrument for tackling territorial disparities in ASEAN and it funds projects to support the weakest countries to comply with ASEAN standards and reinforce their development policies. These projects generate as a “multiplier” for interventions funded by national resources, international cooperation or development banks. FOCEM, MERCOSUR’s main financial instrument, is rather small in size (EUR 127 million in 2015). The fund, financed by the richest countries, supports projects for promoting infrastructures, enterprises and social cohesion mainly in the weakest countries.

The sub-regional arrangement, which defines a common macro-regional strategy for groups of countries or regions, provides ASEAN with an additional instrument for the reduction of development gaps. These strategies are not funded by ASEAN but are a framework to channel international donor and national resources in those areas. These initiatives associate all countries under a single strategic umbrella and, mutatis mutandis, can be compared to the EU macro-regional strategies.

The disparities and the economic convergence in the two organizations have varied enormously in the last 15 years: the disparities among the countries in ASEAN are very large but are converging, while the disparities in MERCOSUR are more limited but over the years have remained unaltered or decreased only slightly mainly due to the fall of some of the richer economies (Venezuela and Argentina). Currently, these features are likely to affect the different political initiatives and strategic capacity in the two organizations.

Link to the full study: http://bit.ly/601-980

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