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Political Economy of Regional Cohesion in Times of Crisis: Case Study of South East Serbia

Political Economy of Regional Cohesion in Times of Crisis: Case Study of South East Serbia. SONJA AVLIJAŠ (FREN, BELGRADE, SERBIA) AND CHIARA GUGLIELMETTI (UNIVERSITY OF TRENTO, ITALY) World Bank Conference on Poverty and Social Inclusion in the Western Balkans

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Political Economy of Regional Cohesion in Times of Crisis: Case Study of South East Serbia

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  1. Political Economy of Regional Cohesion in Times of Crisis:Case Study of South East Serbia SONJA AVLIJAŠ (FREN, BELGRADE, SERBIA) AND CHIARA GUGLIELMETTI (UNIVERSITY OF TRENTO, ITALY) World Bank Conference on Poverty and Social Inclusion in the Western Balkans Brussels, December 14-15, 2010

  2. Contents • Regional cohesion and local development in Serbia through II. Instruments of decentralisation and regional policy III. Impact of the international economic crisis on these processes IV. The case of East Serbia, Timok Region: main research findings (fieldwork and qualitative research interviews) V. Concluding remarks 2

  3. Regional Cohesion in Serbia • Center-periphery relations: critical long-term question • Reduction of regional disparities: • Policy issue before the break-up of former Yugoslavia • Regained momentumover the last decade • Growing spatial inequalities in the 2000’s – ratio 1:16 • Economic growth failed to translate into employment • Losers of transition spilled onto government “taps” • Decentralisation taking place in many sectors in order to improve service delivery at the local level • Decentralisation policies not matched by adequate resources

  4. Regional Policy (1) • Centrally managed: • National Investment Plan, 2006 (€600m 2007; €120m 2009; €250m 2010); • Serbian Development Fund (i.e. credit lines; subsidies for entreprises) • Measures implemented by line ministries • Lack of: • Coherent selection criteria and trasparent strategy • Cross-sector cooperation • Process and impact evaluation • Microeconomic restructuring, improvement of business environment and competition policy

  5. Regional Policy (2) • 2007 Ministry of Economy and Regional Development • 2009 Law on Regional Development (amended 2010): • Regions as statistical functional territorial units (art. 4) • Plethora of national and regional level instituttuons • Fundamental change in the Law: recognition of existing RDAs instead of creation ex novo • RDAs: bottom up, often donor driven (municipalities, cities, NGOs, private sector) started in 2003

  6. Critical aspects and unsettled questions • Decentralisation – Regional development – Regionalisation: • Intertwined in political discourse • Over –politicised • Threatens to diminish support for decentralisation of service delivery • RDAs: undefined role and status (accreditation needed) • Complex process of institution building that influence inter-institutional relations in unstructured ways (RDAs, LSGs) • LSGs: no role in new institutional framework for RD, although the only sub-national tier of government • fundamentalactors in legitimising RDAs

  7. Impact of the 2008-10 crisis • 2006 Law on financing LSGs broken in 2009 and 2010: transfers to LSGs reduced by 13% (following SBA with IMF) In the context of: • Deteriorating economic and social conditions (employment at 47.2%, and unemployment at 20.1%, April 2010) • Lower tax revenues • Pre-existing unresolved issues (e.g. Law on Public Property; Exploitation of common pool resources)

  8. The case studyofEast Serbia: Timok Region Source: RARIS

  9. Background of Timok Region Double heritage: • Vital economic - mainly industrial - area of former Yugoslavia • ore deposits (RTB, high living standards; migration to Bor and Majdanpek, one company towns) • water resources (Danube, Đerdap I and II, transnational cooperation) • Transit area • more than 300.000 hectares of farming land • Severe economic downturn due to • Long-term economic crisis started in the 1970s • Break-up of former Yugoslavia: economic devastation and change of tourism and transit routes • Economic transition Strong “regional” identity • Neither administrative, political entity nor statistical territorial unit • RARIS, Regional Development Agency of Eastern Serbia, 2007

  10. Timok Region: Case study of “failed transition” • Deindustrialisation (Industrial employment rate fell by 240% between 1991 and 2008) • Underdeveloped agriculture (fragmented ownership, poor technology) • Privatisation: poor results (RTB, Salaš), industrial complexes underutilised or abandoned • Education, healthcare and transport infrastructures, water supply and sewage systems severely affected • Environmental pollution (RTB Bor)

  11. Timok Region: Case study of “failed transition”

  12. Timok Region: Case study of “failed transition”

  13. Timok Region: Case study of “failed transition” Depopulation (Bor: from 317,405 inhabitants in 1991 to 284,112 in 2002) Outmigration & low fertility rate: ageing of the population Brain drain (33% of population older than 15 did not complete primary school)

  14. Regional Policy in Timok Region (I) • Favourable position: Pan European Corridors IV, VII and X; EU Strategy for the Danube • Natural and historical resources (geothermal springs, Natural Parks Đerdap and Stara Planina, Iron Gates; Lepenski Vir and Felix Romuliana, UNESCO World Heritage Site) • Long-term commercial (high level of exports which tend to constantly exceed imports) and industrial cooperation with Romania and Bulgaria • Industries (Đerdap, RTB) Infrastructural and industrial programmes But • Unclear agenda (industry vs. eco-tourism) • Politically visible investments with negligble local implications (Corridor X, skiing resort in Stara Planina) • Investments in human resources and SMEs left to donors

  15. Regional Policy in Timok Region (II) Need of a comprehensive effort, pivotal role of public policy • (Few) Attempts to boost SMEs failed (Bor and Zaječar accounted for 1.2% and 1.3% of total SMEs in Serbia in 2008, and for 0,7% of the National Value Added) • Underdeveloped agricultural sector (a bottom-up upgrading process is highly unlikely) RARIS • Significantly engaged in coordination and promotion of regional development and advocacy campaigns • Regional Development Strategy and Plan under way (2011): first attempt • Participative process, local embeddedness • Commitment towards regionalisation

  16. Concluding remarks • Regional cohesion crucial for poverty alleviation and social inclusion (esp. through labour market) • Regional cohesion is a highly politicised process • Its failure is compensated through passive support (cash benefits) • RDAs underutilised as a vehicle for LED • No efforts to improve the business environment • Importance for cross-sectoral cooperation in attempts of economic revitalisation • Trade-off between short term political concerns vs. innovation and sustainable growth

  17. Thank you for your attention!

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