Development reframed: comments on the 2013 Romanian regionalization approach.

Maniu, Mircea Teodor

General Outlook

Soon after the 2005 reconsideration of the Lisbon Strategy, a process mainly aiming to improve the competitive position of EU's regions in a more and more competitive world economy by fostering growth, employment and overall competitiveness, the crisis was already a widespread phenomenon. Looking back in the 2007-2013 EU budget, we can notice that Romania has been allocated almost 20 billion Euros under the Convergence Objective 1 and more than 450 million Euros under the European Territorial Cooperation Objective, while the very Regional Operational Program amounts to 3.7 million Euros. In EU's planning the bulk of these funds, actually more than 80%, was supposed to contribute to the so called Convergence Regions, defined as those territorial units situated under 75% of EU's average income, which will obviously depict the situation of Romania. Only the less than 20% rest was supposed to finance European competitiveness. But if we adjust these figures with the degree of absorption (1) of EU funds in Romania, we will suddenly become much less optimistic for the overall evolution of the regionalization approach.

Nevertheless, interpreting recent data we can state that EU Cohesion Policy Programs in Romania could contribute to at least an increase of 15% in GDP, as computed for the whole 2007-2013 budget period. Such a vision was definitely tributary to the largely overrated absorption capacity of the country, in connection with the lack of proper econometric means in order to assess the amplitude of the crisis. (2) Since one cannot judge without significant political bias what worked, falling right in place, and what was spent inefficiently in this process, I favor a procedure that could embed all the measurable inputs, and to a large extent also outputs, at regional level. Let's assume that such an approach would necessarily be a "smart", innovative, regional pattern for development. This could work for Romania, for reasons to be elaborated below, on the long run, just as the administrative reform initiated in Poland (Petrakas, Maier and Gorzelak, 2001) in 1999 was proven successful and fruitful only a decade later, and even more relevant, this happened in harsh crisis conditions. (3)

So, my point is that any growth engine that worked in various moments for Romania (domestic consumption, exports) cannot make the difference on the short run as a politically induced "push-up" process that would build the necessary entropy for the next EU budgetary cycle. Making viable the Romanian regions among the 273 NUTS II (4) type of regions does not mean only updating a task that was embedded in the Romania's Accession Treaty and should have occurred anyway long time ago. In a juncture when it is obvious that the regions of Europe become increasingly quasi-independent players, EU or even world scale, doing this means only to play the game of the moment. As the regions are motivated by the increased challenges that derive today from global economic perspectives, and various and complex exogenous factors tend to re-shape even less opened economies, the managerial layer of governance of the regions turns to be a proper decisional step. (5)

Romania on the Regionalization Track

EU inspired approaches towards regional development and consequent regionalization occurred in most Central and Eastern European (CEE) countries during the 90s. At this stage Romania's regionalization policy has been described in numerous sources as a classical effect of "Europeanization" (6) bluntly meaning the chase for pre-accession funds. Following preliminary results in respect to EU funding a Green Card concerning regional development and the Law of Regional Development (151/1998--modified in 2004) were passed. Almost on the spot, Romania was "divided" into 8 development regions (DR). True, the law was conceived in such a manner that the counties in place would negotiate and later on join a certain development region on volunteer basis, according to the results of negotiations, public consultations and feasibility studies. But it was clear that the priority task of the Government, namely to create a territorial frame of NUTS II type in Romania, implicitly designed in order to absorb EU money, was accomplished.

It is not beyond discussion the fact that such a scheme was drawing upon the 1976 National Territorial Plan, a politically driven plan that imposed on Romania a development model having as main target diminishing of the economic imbalances between counties and historical provinces but purposely ignoring the past and the historical peculiarities of those territories. (7) While keeping in place the 1968 administrative grid (actually still valid in 2013), regions, in the sense we are branding them today, were inexistent during the communist regime, though the very name of region, used in the sense of county, was in legal use between 1951-1968. Such an approach, fully consistent with the communist obsession of even industrialization throughout the country, and the fact that the overall development should be nothing but a consequence of industrialization, led to the situation that practically all the Romanian macro-regions (historical provinces) developed heavy industries, obviously redundant, while inter-regional linking infrastructure was the least priority of the regime. Not to mention that significant developmental discrepancies were still to be observed during the late 80s. (8)

There is no wonder that building on such grounds and mechanically conceiving the regional framework in order comply with EU funding procedures has been branded as strongly artificial and ultimately conceived as nothing more than "another transitional tool" of regionalization, subject to change as soon as the economic geography will start to matter in terms of transactions' costs. (9) It is exactly what is invoked by those willing to approach the issue in a top-down manner, through major legal administrative changes, including the Constitution. Namely the Government decided to launch a campaign in order to familiarize the society with the fact that the very core of the process of regionalization should be the economic optimality and cohesion only a subsidiary effect, to be boosted mainly through EU platforms. It is empirically proven (in other countries) that any decent SWOT analysis would indicate the cost effectiveness of this approach. The opponents of this view are favoring a bottom-up approach which implies the "natural" non political creation of regions on dual basis: a decent macro PEST (Political, Economic, Social, Technological) investigation, conducted country wide along with general public consultations in order to determine precisely the state of the public opinion concerning the issue. The non political trade-off would be definitely the timing of the operation, the second implying a much longer period till in place, while the first would inevitably trigger public unrest concerning decisions that would influence the destiny of common people simply by political will.

Main Rationale for Regionalization: Diminishing Transactions Costs

While some sources point out to the fact that the term European regionalism refers to the emergence of overtly political regional pressures across Europe, mainly due to the resurrection of multilayered identity, most of them consider that economic competitiveness would be the capital driving force behind regionalism. (10) From an economist's point of view, the territorial evolution of the geographic areas of Romania has been traditionally conducted through factorial analysis. Interpreting the factors one can explain the various correlations of demographic, social, business, infrastructural, etc.--features that illustrate the process of territorial economic growth and development. But this traditional framework was developed in a lesser opened economy than today's world and became obviously obsolete from many standpoints. Building primarily on factor endowment and trading based on a Hecksher-Ohlin-Samuelson factorial case seem irrelevant for so many developed countries. Therefore, "clustered development" (Rostow, 1971) points towards comparable territorial meaningful structures, stable over time and also flexible enough to adapt to the present day technological rapid changes. (11) Territorial clustering means more than analyzing the inputs, outputs and business environment, it deals with infrastructure, security, social life culture and identity and overall living standards.

As the main (political) deciding factors in EU as well as relevant stakeholders become aware of the benefits of increased competitiveness of European regions from the viewpoint of the clustered development, regional, national and European frameworks of development are today under scrutiny. Regions as territorial-geographic concentrations of not only demographic communities, but also firms, NGOs, infrastructure, public and private services. Clusters of regional consistence usually take advantage commercially of the specific bond that is more or less generated throughout history, to a far larger extent than countries as a whole. This is also the case of Romania, let's face it. But can they become really functional unless the triad of micro, intermediate (dedicated to a specific branch of the economy) and macro levels of policies would be effectively in place for that purpose? (12) Regionalization, no matter if we are dealing the Romanian case or else, should tackle the issue of "creating" a territorial unit with a specific morphology and also a structural dynamic of governance that could push evolutionary processes in a more vivid manner than government proved to be able. It is precisely this "centripetal regional dynamics" that generates cohesion, the feeling of belonging to the core instead of periphery, and generating action consequently.

If one can identify a location share differential, forcing regions to be different and actually get more different as benchmarked to national or international territorial entities, mainly for trading reasons, this cannot be valid unless the difference translates into diminishing the costs of transactions, not only for commodities and common services, but also for peculiar services such as the cost of investing, within that specific territorial unit, as opposed to the country wide determined cost. Of course, elaborating at this crossroad of the issue, I would say this is not feasible without a proper (regional) institutional framework, fully operational, able to implement and make fully functional several layers of governance, situation which brings to surface the issue of evaluation. Because it is obvious that regionalization seen exclusively from an administrative standpoint (as the Romanian case appears, at least from a PR perspective) implies plenty of political interface, which due to the lack of popularity of the domain, could and probably would reverberate negatively over the whole process.

What I have in mind in this respect is the fact that the potential burst of bargaining concerning the potential limits of the regions, the status of regional capital cities, governors, appropriate institutional bodies, inevitably re-considering the administrative status of various communities are painful and time consuming processes, that could easily jeopardize the regionalization process at this stage, due mostly to the wrong public perception. But if the civil society's perspective could be somehow switched from the present day "administrative blueprint" and the emphasis could fall on clustering local businesses following a process of technological and even social networking, and therefore giving territorial consistency to a certain output, this would be a meaningful approach indeed. Putting the accent on proper regional diffusion of knowledge, transfer of good practices and emphasizing success stories, could work much better in my opinion in the case of Romania. Combining various layers of expertise (research units and higher education institutions, innovative companies and, why not, pilot administrative units of governmental bodies) to a degree that was never functional in Romania, though theoretically existent, would probably make those entities gather momentum for more sharing of their assets to the benefit of the whole region, just as this format of sharing is documented of not being operational countrywide.

Moreover, if a regionally administered conglomerate of fiscal contributors are "glued" by the same giving-receiving pecuniary interests, and the process is supplemented by "local pride", branding, and provided there is in place a preliminary scheme of contractual consistence targeting this limited associative pattern regulating the process, the chances to register positive outcomes of regionalization seem increasingly decent. I see this pattern of clustering more or less as a must adopt "risk minimizing tool" for both the business environment and regional communities. Such an approach could enforce, to a much larger degree than free market can do, and actually did in Romania, that in a certain area all the needed inputs are available in place, but also the necessary infrastructure and even supra-structural regulations and institutions are available for the business environment and citizens. Bottom line, the idea that transaction costs diminishing has as a prerequisite a public layer of governance that would be the guarantor of evolution in terms of secure sustainable development in a friendly environment.

Strongly believing that a region, as depicted above, has the potential to eliminate most of the intermediate levels of decision and therefore enable a more efficient development of all social and economic processes that occur in that region, some extra-economic details should be enhanced. Transactions as dealt in this paper are exceeding by far pecuniary transactions, and the issue of diminishing costs is definitely applicable to a larger extent in this respect. The region should extract assets from a multilayered type of cohesion, historically generating networking of various consistencies. If that breeds social identity on the one hand, economic links that forge peculiar coordinates of economic life on the other hand, all these scripts cannot be put at test on the short run but through the emergence of "pools of regionalization". Just as the economic clustering process is illustrated by the emergence of the alpha-clusters, (13) industrial type of structures that are characterized by innovation above all, regionalization should cover a far larger landscape, including the inherent sprawl that comes with the urbanization process, the territorial agglomerations of factors (IT, education, health, but also some public services) designed from scratch for the reduction of the transactions' costs. Last but not least, a true region in a multilaterally developed society offers not only higher incomes and material compensations, but also more important, increasingly higher quality of life.

Top-down Regional Approach

Much energy was dedicated throughout EU towards the so called political regionalization (14) or the granting of significant legislative power to regional representative bodies (Catalonia and Basque country in Spain, Flanders in Belgium, Scotland in UK and even in the archetypal model of a centralized state, France, for the case of Corsica) usually having in mind historically delicate, to say the least, ethnic specificities. Though the model appealed to many political forces in the ethnic mosaic of Central and Eastern Europe, not a single country decided yet for such a radical model, encapsulating too many (previously) seen and unforeseen dangers. But this random example only illustrates the fact that the most publicized bottom-up case of regionalization turned (at least for the time being) unsuccessful. Could it work, again bottom-up, on different coordinates, such as purely administrative ones? It is my strong opinion that no matter how relevant would be the effort to convince the public opinion to back a certain pattern or to debate mass scale concurrent models of regionalization, whatever that could be accomplished would be further dividing the society when it comes to this matter. I will try to insert a couple of argumentative facts illustrating this view.

Despite the fact that quasi-liberal measures were undertaken all over the communist at the time Central and Eastern Europe starting with the 70s, Romania adopted a radically different path. While the Hungarian patterned "goulash communism" took off as early as 1968, Yugoslavia already experimented self-management and private entrepreneurship. Poland was definitely an "out of the box" case by communist standards. Not to mention the fact that China moved towards "one country two systems" in the early 80s, a time that witnessed also the Soviet glassnost and perestroika. Though, in line with international developments, Romania formally adopted a so-called New Economic Mechanism in 1978, allegedly giving more decision power to lower levels of the economy, this was by far only a propaganda tool. The short and even long run implications of this oxymoronic situation was a false perception of the mechanisms that govern the economy and the market, situation which was fully visible in the early 90s, when Romania took such a divergent path from the bulk of the comparable countries.

So, on these grounds of knowledge concerning the basics of free market, supplemented with the exacerbated mimesis in mocking EU procedures which could not be assimilated rationally, regionalization consonant with the rest of Europe seemed a far cry for Romania. Not quite the same situation throughout CEE. As the Report on Economic and Social Cohesion, determined by the assessment of EU's regional policy, having in view the new geo-political realities of Europe, was published in 1996 and clearly pointed there is no direct link between the type of regionalization (15), as observed in the 12 member states of the moment, and the peculiarities of the economic development in those countries. Soon after joining EU, most if not all CEE countries adopted coordinates of regionalization that suited better their interest. While Bulgaria, Estonia, Lithuania, Slovakia and Slovenia created an administrative frame entirely subordinated to the central government, but acting on regional basis, other countries, such as Hungary and Romania, implement regional policy mainly through the existing local authorities, obviously created for other ends in the previous regime, but mandated specifically for this task. On the other hand Poland and Czech Republic (16) effectively adopted regional decentralization, consisting in the creation of specific decentralized structures, new categories of territorial authorities, in larger constituencies, obviously targeted towards growth and development.

If we interpret empirically the path and the accomplishments of CEE countries it seems evident that early in terms of timing and top-down in a procedural perspective are the winning cards. Evidently diversity and initial differences are assets for a successful regionalization track, but EU offers sufficient conditions in order to assess that initial conditions could not matter less, if a "smart" policy framework is put in place (Hilpert (2003). In the case of Romania that evidently means to the re-interpretation of the administrative decisional levels. Conferring powers to regions would actually mean de-periphery-zation of at least the most competitive regions of the country with potential significant "locomotive" effects. Facing the fact that the Romanian economy is peripheral within the overall economy of the EU full integration at this stage (i.e. within Eurozone) cannot but enhance the scale of becoming more peripheral. It is difficult to assess at this stage if factual de-periphery-zation could be accomplished at regional level, but there are sufficient examples in this world that could prove the contrary.

Let's add one more important argument, illustrating the top-down case. It is a fact that development is interpreted in most sources as a phenomenon which is definitely more related to the territory where it occurs, that simple growth. While overall development grounded on high value added output represents the ideal approach in the present day economy, there are no significant examples that such a framework could be operational from start countrywide. The empirical evaluations of high-tech mono industries located at regional level are definitely better, and more important, less prone to collapse under crisis conditions, than any development scheme conceived for the whole country ab initio. Of course the Achilles's heel in this case would be the potential inadequacy to the juncture of the world, continental or national markets, inducing severe recession in that mono industrialized region. But it seems that nowadays it is more important and more convenient to undertake the risk of acquiring top class technology that would put a region I another technological league, at all risks than simply evolve in full synergy with the past of that particular territory. (17)

Another supplementary argument pleading in favor of the idea that regionalization is today one of the most important triggering factors for development in Romania would be, paradoxically, the assessment of the growth and development in connection with the accumulated experience of transition and joining EU. While the process of transition occurred evidently spontaneous and falls into the "stop and go" pattern, it definitely could be branded as mostly endogenous, while joining the EU was obviously an exogenous process that change the coordinates of evolution, up to the point of distortion (Mattli and Pluemper, 2004). If there is a point in considering that the heavily political exogenous process of acceding to EU, inevitably forged "aggregated identity" sometime ignoring lessons derived from centuries of peculiar evolution, regionalization simply might be the answer. The deeper implications of moving from traditionally organized national frameworks to regional ones could be interpreted in this view as the de facto empowerment of the endogenous dimension of the economy. The trajectory of Poland during the crisis, a country that really took into consideration the endogenous growth perspective, is a relevant indeed example in this respect.

Admitting the fact that such a perspective actually leads to the conclusion that regional integration mainly targets lowering different economic and social transaction costs between participants, as opposed to non-participants, we should take into consideration other kinds of possible interpretations. For instance, beyond the already discussed ethnical regionalization, exclusively building upon the dichotomy endogenously/ exogenously driven type of growth, could make us end up in interpretations of regionalism as "postmodern feudalism" (Siebert, 2002) therefore encapsulating much of the liabilities this epoch is associated with, autarchy coming first. But we should acknowledge that in a more and more competitive environment, in a world infested by so many non-tariff types of barriers, bringing competition towards lower and informal levels of PR manipulation, there is nothing wrong if EU tries to bring to life patterns that are deeply rooted in its own history. Therefore at first glance, and this time strictly form an economist's perspective, the "Union of the Regions" mainly appears to be a federalist approach, especially designed for a better specification of the division of powers between central and regional administrative levels. Such a scenario could not be, in my opinion, anything but benefic for a country like Romania.

I put on paper these comments exactly at a time when it became public the official announcement that the revision of the Constitution and consequently the regionalization process are "regrettably" postponed for 2014, exclusively for political reasons. Correlating the dimensions of the process with the constraints of the new EU budgetary cycle starting in 2014, the news cannot be worse for Romania's developmental perspectives. But the public debate conducted in such a manner that everybody should be aware of the negative consequences of indefinite postponement, should start on the spot. Dixit et salvavi animam meam.

Bibliography

1. Bukovski, J., Piattoni, S., Smyrl, M. (2003), Between Europeanization and Local Societies, The Space for Territorial Governance, Rowman and Littlefield Publishers, Lanham, Boulder, New York, Oxford, 2-7.

2. Herschel, T., Newman, P. (2002), Governance and Europe's City Regions, London/New York: Routledge, 25-28.

3. Hilpert, U. (Ed.) (2003), Regionalization of Globalised Innovation, New York: Routledge.

4. Daianu, Daianu (2000), Incotro se indreapta tarile postcomuniste?, Iasi: Polirom.

5. Martins-Rodriguez, B., Viedma-Marti, J. M. (2006), "The Region's Intellectual Capital Benchmarking System: Enabling Economic Growth through Evaluation", in Journal of Knowledge Management, Vol. 10, No. 5.

6. Mattli, W., Pluemper, T. (2004), The Internal Value of External Options --How the EU Shapes the Scope of Regulatory Reforms in Transition Countries, EUP--European Union Politics, Vol. 5 (3), London: SAGE.

7. Nagarajan, A., Mitchell, W. (1998), "Evolutionary Diffusion: Internal and External Methods Used to Acquire Encompassing, Complementary and Incremental Technological Changes in the Lithotripsy Industry", in Strategic Management Journal, Wiley Inter Science, No. 19.

8. Patterson, W. (1994), Rebuilding Romania, Energy, Efficiency and the Economics of Transition, London: Earthscan.

9. Peterson, John, Shackleton, M. (2002), The Institutions of the European Union--"Chapter 15, Social and Regional Interests: ESC and the Committee of the Regions", Oxford: Oxford University Press, 326-346.

10. Petrakas G., Maier G., Gorzelak G. (2001), Integration and Transition in Europe: Economic Geography of Interaction, London: Routlegde.

11. Popa, E. (1999), Autonomia locala in Romania, Bucuregti: Editura ALL BECK.

12. Porter, Michale (1998), "Clusters and the New Economics of Competition", in Harvard Business Review, Boston, November/ December.

13. Rostow, W. (1971), Politics and the Stages of Growth, (First Ed.) Cambridge: Cambridge University Press.

14. Schoales, J. (2006), "Alpha Clusters: Creative Innovation in Local Economies", in Economic Development Quarterly, SAGE, No. 20.

15. Siebert, H. (2002), The World Economy, Second Edition, London: Routledge, 199-208.

16. Traistaru, Iulia, Pauna, Carmen (2003), "The Emerging Economic Geography in Romania", in I. Traistaru, P. Nijkamp, L. Resmini (Eds.), The Emerging Economic Geography in EU Accession Countries, Aldershot: Ashgate, 242-283.

Mircea Teodor Maniu *

* Mircea Teodor Maniu is Associate Professor at the Faculty of European Studies of Babes-Bolyai University in Cluj-Napoca, Romania. E-mail: mmaniu@euro.ubbcluj.ro.

(1) Romanian Prime Minister Victor Ponta assesses that while at the end of 2012 Romania could not reach more than 12% of the allocated funds, in July 2013 this figure significantly improved but it will not exceed 20% in the first half of 2013. (Romanian Academy, Debate about Regionalization, Bucharest, April 2, 2013)

(2) See in this respect Gh. Zaman, G. Georgescu, "Structural fund absorption: a new challenge for Romania?", in Romanian Journal of Economic Forecasting, Nr. 1/2009

(3) G. Petrakas, G. Maier, G. Gorzelak, Integration and Transition in Europe: Economic Geography of Interaction, London: Routlegde, 2001

(4) The Nomenclature of Territorial Units for Statistics (NUTS) is an Eurostat device providing a single "uniform breakdown of territorial units for the production of regional statistics"; although NUTS has no legal value per se throughout EU, NUTS was effectively in place since 1988, the reviewed 1999 version indicating five territorial levels, for the Romanian case (2011) these are: NUTS I: the whole country; NUTS II: 8 development regions; NUTS III: 42 counties); NUTS IV: not applicable (EU pattern indicates territorial associations, mainly big cities); NUTS V: 323 municipalities and towns and 2859 rural communities (consisting of approximately 13.000 villages).

(5) John Peterson, M. Shackleton, The Institutions of the European Union, Oxford: Oxford University Press, 2002, pp. 326-346.

(6) Daniel Daianu, Incotro se indreapta tarile postcomuniste?, Iasi: Polirom, 2000; J. Bukovski, S. Piattoni, M. Smyrl, Between Europeanization and Local Societies, The Space for Territorial Governance, Lanham, Boulder: Rowman and Littlefield Publishers, 2003, pp. 2-7.

(7) E. Popa, Autonomia locala in Romania, Bucurefti: Editura ALL BECK, 1999.

(8) W. Patterson, Rebuilding Romania, Energy, Efficiency and the Economics of Transition, London: Earthscan, 1994

(9) Iulia Traistaru, Carmen Pauna, "The Emerging Economic Geography in Romania", in Iulia Traistaru, Peter Nijkamp, Laura Resmini (Eds.), The Emerging Economic Geography in EU Accession Countries, Aldershot: Ashgate, 2003, pp. 242-283.

(10) T. Herschel, P. Newman, Governance and Europe's City Regions, London/New York: Routledge, 2002, pp. 25-28.

(11) Michale Porter, "Clusters and the New Economics of Competition", in Harvard Business Review, November/December, 1998

(12) B. Martins-Rodriguez, J.M. Viedma-Marti, "The Region's Intellectual Capital Benchmarking System: Enabling Economic Growth through Evaluation", in Journal of Knowledge Management, Vol. 10, No. 5, 2006

(13) J. Schoales, "Alpha Clusters: Creative Innovation in Local Economies", in Economic Development Quarterly, SAGE, No. 20, 2006.

(14) Several authors point out to the fact that the term regionalism refers first of all to the emergence of overtly political regional pressures across Europe, due to the inadequacies of the present day state; others consider that economic competitiveness is by far the major driving force of regionalism (see in this respect T. Herschel, P. Newman, op.cit., pp. 25-28.)

(15) Five main types of regionalization could be identified in the legal (constitutional and administrative) domain of most EU countries in the early 90s: administrative regionalization; regionalization through the local authorities already in place; political regionalization; regional decentralization; federalization.

(16) Actually the former Czechoslovakia was the only CEE to have in place a regional form of territorial unit comparable with NUTS II. The Polish voivodships also matched several criteria of regional framework, as present throughout EU.

(17) A. Nagarajan, W. Mitchell, "Evolutionary Diffusion: Internal and External Methods Used to Acquire Encompassing, Complementary and Incremental Technological Changes in the Lithotripsy Industry", in Strategic Management Journal, Wiley Inter Science, No. 19, 1998