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Operational Programme 'Réunion'

Programme co-financed by the European Regional Development Fund (ERDF) under the Convergence objective

On 20 December 2007 the European Commission approved an Operational Programme for Réunion (France) for the period 2007-2013.

This Operational Programme comes under the Convergence objective, with a total budget of about 2 billion euros. The financing by the European Union under the European Regional Development Fund (ERDF) is around 1 billion euros, representing about 7.1% of Community aid to France as part of the cohesion policy for 2007-2013.

 

1. Purpose and aim of the programme

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Réunion, an island situated in the Indian Ocean, is the only European region in the southern hemisphere. It is currently at a turning-point in its development, involving its economic base, the organisation of its territory and societal cohesion.

Mainly as the result of natural growth, there is a strong and steady increase in population, which went up by 10% between 2000 and 2005. This trend will continue until 2030, when Réunion should have a population approaching one million (i.e. an increase of 29% compared with the 2006 figure of 785 000). The population is young, with those under 20 accounting for 35% of the total population compared with the EU figure of 23% in 2005. The issue of ageing will nevertheless start to be felt from 2014.

This strong growth results in significant social demand which has an impact on all public policies, especially housing, jobs and public infrastructure and services. The active population is growing rapidly under the combined effect of demographic pressure and changes in behaviour.

Social cohesion on the island is fragile. The unemployment rate is going down but remains persistently high (32% in 2005, more than half of whom have been without work for more than two years). The figure is as high as 46% for those aged 15-29. The employment rate remains low (40%). A quarter of the population relies on the minimum social income. It is estimated that nearly 120 000 people are illiterate, i.e. 16% of the population (compared with 1% in metropolitan France).

One paradox of Réunion is that the island's economy is growing at a much faster rate than that of the French and European economies, with growth of 4.3% between 1993 and 2002 and a steady annual rate of net job creation. However, this growth is not enough to match the increase in the active population.

The structure of the island's economy has evolved considerably in recent years to bring it more and more in line with that of metropolitan France. In two generations Réunion has moved from a single-industry economy based on sugar cane to a service-based economy (more than 80% of value added). Agriculture, production of sugar/rum, wholesale and retail trade, general government and construction are still the predominant sectors but their relative significance has stabilised or is declining slightly. Growth is now driven by market services and industrial diversification. Tourism, which has recently emerged as a sector, is now the leading source of external earnings.

The local factors of production benefit only marginally from the rise in final consumption driven by government transfers, with the bulk left to imports. Trade is seriously imbalanced. The strategy of import-led growth must now turn more towards export markets.

Because of the island's rugged terrain only about 1 000 km² of the total area of 2 500 km² can be used for housing and economic activity, and 85% of the population is concentrated along the coast (i.e. an actual population density of nearly 800 people per km2). In this context, regional planning, dealing with urban sprawl and commuting, rational management of natural resources and their protection against pests are interlocking concerns for sustainable development.

Like other remote regions, Réunion has to cope with several permanent disadvantages which together give rise to a variety of additional costs and hamper development: remoteness from the European market (more than 9 000 km), island status, small surface area (2 500 km²), difficult terrain and climate (cyclones and rainfall), economic dependence on a small number of products, together with very low GDP in the countries situated within a radius of 2 000 km.

While several sectors – especially public facilities - are still lagging behind because of demographic pressure, there is at the same time a vital need to boost the competitiveness of the island's economy by exploiting its assets and achievements within its geographical area.

In line with national and Community strategic guidelines, the aim of the regional strategy is to devise a "competitive model" for Réunion combining economic, social and environmental aspects in a dialectical approach to encourage catch-up and to foster competitiveness. In a context of increased competition, the idea will be to focus on outward-looking strategic sectors (tourism, logistics) and to make the island a European platform in an area of vital challenges (research, training, medicine) while continuing to meet the ongoing difficulties involved playing catch-up. Economic appeal, social cohesion, boosting the skill levels of human resources, development of internal and external markets, quality of the environment and involvement as a regional partner are the key aspects of such competitiveness.

This is a unique regional strategy for Réunion, shared by the various operators involved and implemented by means of various existing tools and instruments.

2. Expected impact of the investment

The Community funding should make it possible to:

  • boost training-research-innovation potential by allowing 300 doctoral candidates to undertake research each year between now and 2015;
  • develop the region's economic potential by financing 500 investment projects in the sectors of industry and craft trades and directly creating 1 500 jobs through these projects and by maintaining the current annual GDP growth rate of 4%;
  • improve environmental quality and ensure sustainable development for Réunion by increasing the production capacity of renewable energy sources by 60MW and by cutting the production of greenhouse gases by 38 kt of CO2 per year from 2007 and by 129 kt per year from 2013;
  • enhance the competitiveness of Réunion by providing the transport and environmental infrastructure needed to meet the expectations of the population (i.e. an extra 150 000 people in the period 2007-2013 benefitting from water treatment meeting existing standards) and maintaining the annual GDP growth rate of 4%.

 

3. Priorities

The earmarking rate for the ERDF is 50%, and it is as high as 68% for the ERDF and the European Social Fund (ESF). The draft proposal for a Commission Decision adopting the Operational Programme for Community financing from the ERDF under the Convergence objective for the region of Réunion (France) is the result of discussions and negotiations between the Commission and France.

The Operational Programme is centred on four priorities:

Priority 1: Making the most of human potential [about 13.4% of total investment]

More specifically:

  • preparing better trained younger generations (facilities for education and vocational training);
  • developing the culture, heritage and identity of Réunion;
  • improving health and medical welfare facilities.

Priority 2: Developing the economy of Réunion in the international environment [about 17.9% of total investment]

The aim of this priority is to:

  • develop a economic and research centre for the Indian Ocean;
  • consolidate the bases of economic and social development by strengthening and renewing the traditional sectors and by developing the strategic sectors; the emphasis will be placed on the three sectors driving growth, i.e. tourism, information and communication technologies (ICT) and fishing;
  • strengthen and develop new financial engineering tools.

Priority 3: Organising the island's territory on the basis of new performance parameters [about 47% of total investment]

The aim of this priority is to organise the island's territory with a view to reconciling population growth, economic development (including agricultural activities) and conservation of the environment.

The primary aim of this priority is to:

  • improve transport networks, especially the first phase of the tram-train project which is being carried out with the dual aim of developing local public transport and the urban structure of the localities served; it also covers the end of the work on the Route des Tamarins undertaken as part of DOCUP 2000-2006, the launch of studies and preliminary work for the coast road between the north and the west;
  • accompany policies for the development of urban areas contributing to the revival and appeal of towns and localities in order to accommodate the extra population to come while dealing with urban sprawl (higher density use);
  • preserve the environment and resources as part of sustainable development; considerable priority has been given to the treatment of waste water and the management of household and industrial waste; support will also be given to actions to curb energy use and develop renewable energy sources, to manage natural risks and to protect and enhance biodiversity by exploiting the opportunities offered by the new Réunion national park and marine reserve, the completion of the project to move water from east to west to irrigate the west coast and a number of investment projects to provide drinking water;
  • improving the island's tourist facilities.

Waste and water management and the development of renewable energy sources are essential strategic tools to achieving this objective.

Priority 4: Offsetting disadvantages caused by remoteness, both at enterprise level and at the economic environment level [about 21.8% of total investment]

This priority will support actions to:

  • offset the additional costs relating to remoteness (support of freight transport, export of hazardous waste, reducing ICT costs);
  • offset the additional costs relating to Réunion's island status (port and airport facilities);
  • offset the additional costs relating to the difficult terrain and climate (investment to protect people and property in the island's interior, etc);
  • offset the additional costs relating to the island's small surface area (helping local firms to acquire land and premises at rates similar to those in metropolitan France so that this factor does not hinder their competitiveness).

In accordance with the Regulation, a minimum threshold of 50% of the additional funding will concentrate on compensatory measures.

4. Managing Authority

Regional management Burgenland GmbH.

Préfecture de la région de La Réunion
Place du Barachois
F-97405 Saint Denis
Tel.: +33 2 62 40 77 77
E-mail.: courrier@reunion.pref.gouv.fr
Web: Préfecture de la région de La Réunion

Financial and Technical information

Title : Operational Programme 'Réunion'

Intervention Type : Operational Programme

CCI no : 2007FR161PO004

Number of decision : C/2007/6825

Final approval date : 2007-12-20

Breakdown of finances by priority axis
Priority Axis EU Investment National Public Contribution Total Public Contribution
Competitiveness of human resources 157 536 703 109 342 435 266 879 138
Competitiveness of the economy 134 331 000 89 553 300 223 884 300
Competitiveness of the territory 516 600 000 390 519 928 907 119 928
Additional costs 205 824 071 109 662 071 315 486 142
Total 1 014 291 774 699 077 734 1 713 369 508
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