The European Union
The EU is an economic and political body comprising of twenty-eight countries mainly in Europe. The EU focuses various issues ranging from economic mobility, stability, transparency, and negotiates as a single entity in the world using a regional policy. This paper focuses on the regional policy of the EU and the smart Specialization, an aspect of the regional policy.
There is no doubt that the OECD is one of the most significant organization in the EU. One of the notable roles of the OECD is to carry out research and coordinate activities for the thirty-four member states of which have actively collaborated come up with a regional policy. The arising question at this point is the role of the regional policy to the European economy.
The current regional policy 2014-1020 has its backing from the previous regional policy 2007-2013, and therefore, the role or the guiding principles remain the same. Working for the Regions-EU Regional Policy 2007-2013, 2008 noted that the EU been more of a common market guided by similar policies and values benefits the members by creating solidarity and increase in their competitiveness. The EU Treaty envisions that the member states would be active in social and economic cohesion that would lead to the reduction of regional disparities. Further, such ensures that all members benefit from the advantages of the common market.
Among the most notable advantages is the removal of trade barriers among the member states. The free movement of capital, labor, and goods allows investors to expand their markets. The use of the common currency i.e. the Euro in the region makes transactions smooth. Fundamentally, a trade region must have some fundamental aspects that make the countries converge and enjoy the comparative advantage (Mursa, n.d).
It follows that the developed nations move in with solidarity with the others to trigger development through public policies that in turn tends to open ways for other private funding and the creation of investor confidence. Estimates show that in the 2014-2020, the cohesion policy resulting from the private and the national funds would be EUR450 billion. From the above arguments, it seems that the cohesion policy is among the strongest of all aspects of the EU Regional Policy. What could be some of the challenges of the cohesion policy?
The mode of governance has also changed slightly. In the previous policies decisions on funding, the projects came from the National Management Committees and the EU. In the 2014-2020, that would not be the case. The funding of the projects would depend on the regional priorities. Typically, the regions have witnessed an increase in convergence in the past decades. It is from this perspective that projects should run as per the priorities other than an almost political approach of trying to use administrative boundaries.
Since the inception of the European regional policy, there are several achievements. First, the EU’s average GDP grew from 60.5% in 2007 to 62.7% by the end of 2010. From 2007 to 2012, there was a creation of approximately five hundred and ninety-four thousand new jobs. Creation of employment is a proven method of uplifting developing nations because it increase the consumption power of the people. As a consequence, investors have to expand their companies with the aim of meeting the market demand. The policy has also created better transport systems (The European Union Regional Policy 2010). These would make the markets efficient.
The cumulative effect would be the growth of the GDP. One of the ways of creating jobs is the funding of SMEs (Small and Medium-sized Enterprises). SMEs provide many jobs to the less skilled people who in most cases find it difficult to get formal employment. For instance, Giua and Crescenzi, 2014 stated that the EU Regional Policy has a positive influence in agriculture and rural development. The SMEs are easy to start and manage. With proper training, most of the people in underdeveloped nations can participate in them. Annually over fifteen million citizens participate the projects across the regions. Nevertheless, it comes with various challenges. What are some of the problems of SMEs as a means of triggering development in developing nations?
The EU policy also aims at making development sustainable through the adoption of methods that conserve the environment. Environmental protection especially the reduction of the production of greenhouse gas is a major concern globally. From this point of view, most regions of the world are emphasizing on methods of production that encourage the use alternative source of energy in production such as solar power, wind energy, and biogas among others.
In the 2014-2020 Regional Policy, there is a new dimension; the "Smart Specialization". The “Smart specialization” arose from the need to identify new and future opportunities in the EU. As noted above on the activities of the EU, there was a necessity to demarcate realistically regions that cut across the member states. The ground truth is that administrative boundaries do not necessary determine the areas as mentioned earlier. It follows that to come up with regions of interest, a methodology that is unique enough such that it surpasses the administrative boundaries was necessary.
For instance, the approach would allow investments in areas with cross national borders such as the Baltic States and those along the Danube River or those in southern Sweden and Northern parts of Denmark. Regional consolidation of the project would reduce wastage that arises from unnecessary duplication in the same locality or areas with the same problem. That notwithstanding, there could be a possible escalation of competition because the national boundaries remain the same and the leadership may not agree on the fundamental framework of operation. Is this not the case?
Further, "Smart Specialization," therefore, emphasizes on the entrepreneurial innovations and discovery and, as a result, enables coming up with knowledge-based assets rather than industries. In this respect, the model of development would focus on innovations in a particular place. As such, it involves the public officers, academicians, community members to identify changes and come up with a structured value chains. In this case, the “bottom-up” strategy is the core of the “Smart Specialization.”
The bottom-up approach offers realistic and real-time experiences affecting the place or region. Therefore, it becomes easy to remove the barriers to start-up businesses such as power supply, and other obstacles that hinder innovators and employees from getting jobs. At the same time, the use of academicians allows the application of evidence from scientific research that offer reliable analysis of trends. Fundamentally, an investment of whatever kind should have a proper backing from research. In case that does not happen, chances of failure are high and the losses enormous.
In summary, the “Smart Specialization,” seeks in the next five years to change the architecture for regionals innovation to focus on places that show innovation potential. Besides that the “Smart Specialization” would seek to modernize production to increase efficiency. It would also diversification of the activities in narrow sense whereby the discovery of synergies and spillover becomes a core business leading to profitability (Goenaga and Foray, 2013).
Giua M. & Crescenzi R., 2014. The EU Cohesion policy in context: regional growth and the influence of agricultural and rural development policies. Available from <http://www.lse.ac.uk/europeanInstitute/LEQS%20Discussion%20Paper%20Series/LEQSPaper85.pdf>
Goenaga X. and Foray D., 2013. The Goals of Smart Specialization. JRS Scientific and Policy Reports. Available from <http://ftp.jrc.es/EURdoc/JRC82213.pdf> [January 23, 2016]
Mursa, G n.d., Euro–advantages and disadvantages. Available from < http://www.ceswp.uaic.ro/articles/CESWP2014_VI3_MUR.pdf> [22 January 2016]
The European Union Regional Policy, 2010. Available from <http://ec.europa.eu/regional_policy/sources/docgener/panorama/pdf/mag33/mag33_en.pdf> [22 January 2016].
Working for the Regions-EU Regional Policy 2007-2013, 2008. Available from <http://ec.europa.eu/regional_policy/sources/docgener/presenta/working2008/work_en.pdf> [22 January 2016]