Original publication: June 2018
Authors: CSIL Centre for Industrial Studies (Italy): Julie PELLEGRIN, Louis COLNOT supported by (case studies): Łukasz ARENDT (IPISS), Luca BISASCHI and Gelsomina CATALANO (CSIL), Žilvinas MARTINAITIS (Visionary), and Giorgio MICHELETTI (IDC) for additional input on digitalisation trends.
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– Annex I:

Objectives and background

The objective of this study is to provide the European Parliament with a critical analysis of the contribution of the European Structural and Investment Funds (ESIF) to the Digital Agenda for Europe and the Digital Single Market (DAE/DSM). This study identifies and assesses specific challenges encountered/lessons learned during policy implementation, and addresses potential policy evolution post 2020. It is based on an analysis of past and current patterns of ESIF digital investments, complemented by six case studies of digital projects funded by ESIF in 2014-2020.

Main findings

This study shows that, at the root of the EU ICT policy, are weaknesses in EU digital performance despite some assets. While it boasts a strong research basis and a rather dynamic start-up ecosystem, the continent as a whole tends to underperform, compared to competitors such as the USA, Japan and South Korea, in terms of advanced ICT infrastructures and uptake of ICT products and services by citizens and enterprises (in particular SMEs). Moreover, there are different ‘digital divides’ at play between and within Member States that yield a fragmented European digital market.

The EC adopted early measures to deal with this situation and developed a conceptual framework that remained stable across programming periods despite the fast pace of technological advance. It culminated in the adoption of the DAE and the DSM in 2010 and 2015, respectively. This policy paradigm relies on a virtuous circle of investments in and usage of digital technologies, involving stakeholders on both the supply (e.g. ICT infrastructure) and demand sides (e.g. ICT uptake and digital skills), and combining concerns for efficiency and inclusion. Since the very beginning, Cohesion Policy has been expected to make a substantial contribution to EU digital policy, because of both its important budgetary envelope and adequate territorial approach to address issues such as the digital divide(s).

In aggregate terms, patterns of ESIF digital investments reflect the holistic approach adopted by the European Commission (EC), i.e. they are diversified across a large range of areas. Overall, ESIF digital investments in 2014-2020 represent around EUR 21.4 billion. ESIF investments in ICT infrastructures are one of the leading areas of intervention with EUR 6 billion, followed by digital investments in a number of areas targeting people, such as e-government, digital skills or e-inclusion (around 40% of ESIF investments in the digital economy). Other forms of ICT support such as Smart Cities and Smart Grids have acquired greater importance since the 2007-2013 programming period and represent around 20% of total planned ESIF digital investments in 2014-2020. The share of ESIF addressed to SMEs is relatively low (EUR 2 billion, less than 10%), a feature that may be explained by the existence of alternative sources of funding. In geographical terms, regions in Southern and Eastern Europe allocated the most to digital investments, in line with the overall ESIF distribution.

A complex governance arrangement underlies the contribution of ESIF to the DAE/DSM’s objectives. Issues in the governance and delivery system account for possible missed opportunities hindering ESIF support for the diffusion of digital technologies in some sectors. For example, the level of priority for ICT infrastructures raises some controversy and the demarcation between ERDF and EAFRD is unclear in this area. There is some uncertainty about who has responsibility for digital skills, and insufficient coordination regarding the use of

ICT to address climate change. Reaping the benefits of synergies with other EU funding instruments, in particular H2020, also remains a challenge.

At local levels, regional authorities often prefer to concentrate ESIF resources for digital investments on a few priorities rather than spreading interventions thin. Field research shows that the quality of strategic planning is a decisive success factor for regional digital strategies. The existence and quality of regional and local partnerships is another critical factor, which can help deal with the possible shortage of administrative capacity at regional level, among other things. For these reasons, Smart Specialisation Strategies appear to be a privileged locus where successful digital strategies can be implemented as they extend the regional and local partnerships and allow for a better alignment of digital priorities with overall regional ones. They are also a way of promoting synergies with H2020 and of engaging SMEs.

Overall, ESIF have specific value added in stimulating partnerships and helping regions to devise good quality strategies. The role of the EC is central in this respect. In particular, the strength of the contribution of the EC resides in its interactions with regional authorities. The EC also acts as a ‘knowledge broker’, establishing exchange platforms with possible partners in other Member States and diffusing information on good practices. The establishment of Digital Innovation Hubs is a promising development in this respect, but some other comparable initiatives sometimes lack visibility and critical mass.

As a final remark, it should be noted that the above findings are based on a specific combination of desk and field research, but that there is no comprehensive evaluation of the contribution of ESIF digital investments to the DAE/DSM’s objectives. There are a few sectoral analyses highlighting mixed performances of ICT infrastructures, for example, or the difficulty in reaching SMEs. In general, this study shows how difficult it is to gather comprehensive updated and reliable evidence on EU interventions in the digital economy and ICT.

Recommendations

The findings of the study offer a clear endorsement of the system of shared management and of the territorial approach it enables. In the context of the high priority placed on digitalisation planned in the next Multi Annual Financial Framework, and considering the probable decrease in ESIF budget following Brexit, it is crucial that Cohesion Policy concentrates its support where it is most effective i.e. in encouraging the adoption of regional digital strategies and steering effective partnerships at regional level – and beyond. In this respect, relevant regulations should ensure that a large proportion of funding be allocated to digital projects while funding supporting administrative capacity or exchange platforms remains complementary. The European Parliament should ensure this principle is applied.

Smart Specialisation Strategies should become the main reference for regional authorities willing to engage in sound digital strategies. For this, the system of Ex Ante Conditionalities connected to digital investments could be streamlined. The current EXAC dealing specifically with digital growth strategies could be replaced by the existing EXAC dealing with the adoption of Smart Specialisation Strategies, on condition that the latter integrate digital priorities. The EXAC dealing with the deployment of broadband would be maintained but it should refer and be strongly linked to the EXAC dealing with Smart Specialisation Strategies.

Smart Specialisation Strategies are also potentially effective in fostering synergies with other EU funding instruments and H2020 in particular. Digital Innovation Hubs are useful instruments in this respect and they could be consolidated or extended, following their assessment.

ESIF should be mobilised to promote digital strategies in areas where the full potential of ESIF contribution has yet to be tapped, e.g., in the area of climate change, rural economy and in sectors covered by the EMFF. For this reason, the structure of Thematic Objectives could be reviewed to account for the horizontal specificity of digital investments. TO2 could cover only broadband investments, while ‘digitalisation’ could become a horizontal priority valid across Thematic Objectives. A system of earmarking could ensure that a minimum proportion of each ESIF takes digitisation objectives into account.

A sound knowledge basis should underlie policy development in support of digital investments. Monitoring systems could be improved by including more (specific and core) indicators dedicated to digital performance (e.g. digital skills). Also, expenditures that fall under other categories of expenditure, but which have a digital component, should be ‘tagged’ correspondingly (on the model of the ‘secondary theme’ currently used by the ESF).

Finally, there is room to improve the governance and delivery of ESIF dedicated to the DAE/DSM. The division of responsibility between DGs and the overall coordination under the supervision of the Vice President in charge of the DSM in the European Commission should be made clearer. A specific demarcation of the competences of ERDF and EAFRD is also necessary with regard to digital infrastructures.

Link to the full study: http://bit.ly/617-485

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