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PART III - THE EU BUDGET AND THE CONTRIBUTION OF STRUCTURAL POLICIES TO ECONOMIC AND SOCIAL COHESION

2 The contribution of structural policies to economic and social cohesion: results and prospects

2.2 Assessing the effects of Community intervention (1994-99)

Objective 5a and 5b: agricultural structures and rural development

Community policy on rural development emerged in the mid-1980s from two broad concerns - a desire, on the one hand, to reduce regional disparities and improve cohesion across the Union by supporting disadvantaged areas and, on the other, to limit the negative effects on rural areas of the reform of the CAP. The policy consisted mainly of an attempt to support the economic activities carried out in the weakest areas, which necessitated formulating a prior analysis of the factors underlying development and of the processes which need to be set in motion, so as to identify both the weaknesses and potential strengths of particular regions. Such an analysis is essential to the formulation of a policy which builds upon local potential.

The factors determining the economic growth of rural areas are both many and wide-ranging: the endowment of factors of production and the comparative advantage which these imply, the distance to main markets, the potential for economies of scale and agglomeration, the capacity for organisation and innovation, and the availability of support services and infrastructure. Both the measures adopted and the network of actors involved in their implementation need to be flexible enough to respond to local needs, since there is no guarantee that measures carried out according to a sectoral or individual logic will be coherent.

Unfortunately, regions sometimes opted for the easiest approach, pursuing measures which were insufficiently targeted or simply continuing with those already in place, failing to strengthen the means of coordinating the activities of the different entities involved or tailor measures to local conditions. A number of French regions reduced the application of certain measures on a territorial basis, and made them components of overall programmes.

In Objective 5b areas, unemployment has risen marginally since 1995, but it is still much lower than the EU average. There is some evidence of net employment growth in manufacturing industries dominated by SMEs, especially - but not only - those linked to the rural economy, as well as in other sectors. Significant diversification of economic activity away from agriculture is underway, which was the main objective of the policy.

Measures to improve infrastructure (eg sanitation, electrification, drinking water) and services (living conditions, above all) have generally been successful, though the recipients of support have typically been local authorities, for which the matching national contribution has not posed a difficulty. On the other hand, involving the private sector and private finance has proved more difficult, possibly because of the lack of a framework for potential investors, and, in some regions, a weak structure of local organisation (in terms of, for example, support networks or interaction between groups) or uncertain economic prospects. Rural areas, with sparse population and access difficulties, can find it more difficult than cities to achieve a sufficient level of demand or offer the full range of services needed to compete at the European level.

Under-performance is, in some cases, explained by the measures adopted not being tailored to local needs or by the availability or more favourable financial support under other public programmes.1 It is also clear that existing firms benefited more from intervention than newly-created ones.

Environmental considerations are included in regional development strategies to varying degrees, the scale of measures adopted being linked to the richness of the natural and physical heritage to protect and the seriousness of any environmental degradation suffered. Policies in this area, however, are complicated by the involvement of a range of interested parties concerned with differing policy priorities.

While there were few projects aimed at protecting flora and fauna or exploiting the natural heritage for tourism, there was a relatively large number of projects for managing household - and in come cases industrial - waste. In the case of tourism, financial initiatives have been dispersed and the evaluations suggest that in future they should be organised around centres and networks of activity.

Similarly, the work involved in the renovation of villages, an item included in most programmes, could be carried out in a more rational way, the heritage (in terms of buildings, culture and architecture) better exploited and the projects better integrated with tourist activities.

FIFG: restructuring the fishing sector

The Financial Instrument for Fisheries Guidance (FIFG), with a budget of EUR 2.6 billion over the period 1994 to 1999, was responsible for funding the following types of activity: reduction in the fishing fleet and its modernisation (50% of the budget), processing and marketing of products (25%), the development of fish farming (10%), the development of fishing ports (7%), product promotion (3%) and social and economic measures (subsidies for ceasing activity, support for early retirement) (5%). This expenditure was carried out in part under Objective 5a, but for the most part under Objective 1.

With the inclusion of the FIFG in the Structural Funds in 1994, economic and social cohesion became one of the major concerns of fisheries policy. Over the programming period, the cohesion countries were allocated 56% of all FIFG funds, 42% going to Spain, by far the largest recipient.
Substantial reductions in the fishing fleet were achieved, especially in Portugal and Spain (Table 20), Community support for these activities exceeding that for construction and modernisation by 60% and for construction alone by 2-2 times (taking account of capacity as well as the number of ships).

The 'mixed' enterprises established with third countries enabled fishing capacity to be exported and jobs to be maintained or created in areas dependent on fishing (ADFs). By the end of 1998, 152 projects had been undertaken and these were directly responsible for 2,400 jobs being maintained or created and indirectly for another 3,000, mainly in Spain and Portugal (which accounted for 55% and 22% of the projects, respectively).

The processing of products was the driving force behind this and is the second most important area of FIFG intervention (accounting for a planned EUR 610 million). The modernisation of the industry has been supported by substantial FIFG investment in technologically innovative firms, improvement of sanitary conditions and the development of certain products. Moreover, there has been strong interest in measures of this kind from potential recipients of support and by the end of 1997, 12 of the 31 projects had been reprogrammed in this direction. FIFG support has helped to limit the employment losses associated with restructuring (see also section II.11 in the present report). By the end of 1997, after only 3 years of FIFG support, the projects financed had created 1,200 jobs in 6 Member States (Denmark, Germany, Spain, Ireland, Finland and the UK), 350 of these in Ireland, 220 in Northern Ireland and 50 in Scotland, and prevented another 360 from being lost (250 of these in Spain). By end-1998, 2,870 projects had been launched, 760 of them in Spain.

Although only 10% of the FIFG budget was allocated to fish farming over the Union as a whole, the figure was markedly higher in some countries (30% in Ireland, 24% in Greece). Initially, it proved difficult to interest many of the potential participants in such programmes, because of low fish prices and the strict environmental standards applied in project selection. Nevertheless, FIFG support has helped to develop a productive structure and to assist a recovery in employment in the sector, especially in the Objective 1 regions (see elsewhere in this report). By the end of 1998, 2,580 projects has been established, 550 of them in Spain and 150 in Greece.

The Structural Funds other than the FIFG - the ERDF and the ESF, in particular - financed port development projects and fishery research, as well as vocational training in Objective 1 regions.



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  1. ENESAD , Synthesis of intermediate evaluations of Objective 5b in France, , April 1998


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