The pitfalls of EU money
By Aleksander Nowacki
Regional policy has become virtually non-existent, as government officials at both central and regional levels focus their attention on waiting for European Union structural and cohesion funds to become available following the country's accession. Their belief that Brussels can supply the solution to all the problems of underdevelopment facing many of the country's regions is leading to government complacency and a failure to work out a genuine strategy of regional development.
"You cannot really argue with that opinion," said Marcin Nowicki, head of regional research at the Gdańsk Institute for Market Economics. What he finds dangerous is that the funds are designed as an instrument to supplement regional policy, while in this country they will have to create policy that is simply not there yet.
This complacent attitude allows authorities to put off serious debate on some of the most pressing issues resulting from discrepancies in social and economic development between regions, Nowicki said. As the experience of the EU's so-called cohesion countries - Ireland, Spain, Portugal and Greece - shows, membership is a stimulus to growth on the national level, but the catching-up process happens at a very different pace in various regions within a given country. The result is that gaps in the levels of development between regions increase.
Black holes
Even more discouraging are the examples of former East Germany and the Mezzogiorno of Italy, which seem to have become "black holes" capable of absorbing any amount of funds with little effect. But if Roberto Basile, an expert at the independent think tank Center for Economic Policy Research, is correct, then Poland will avoid falling into the same pit. Basile points to the contrast between the poor outcome of policies adopted for backward regions of developed countries and the generally encouraging results of cohesion policies in relation to the peripheral member states.
"The same policy can be considered a distortion of competition if it is used to promote development of regions within a country, while it may be accepted when it concerns a whole," he said.
That is by no means to say that complacency is at all justified. Jean-Marc Trarieux, head of the agriculture and regional development section of the European Commission delegation, explained that lack of transparency could be a very real threat to efficient use of EU funds.
"The key issue here is that you must have effective control mechanisms in place," he said. "That is something that the domestic authorities will have to do; we can only encourage them. But our experience with the Phare program (an EU pre-accession funding scheme) has been encouraging." He said that the satisfactory implementation of the pre-accession funds demonstrates that the very real problem of corruption in the country can be overcome and that "Poland need not become a 'leaking vessel' like the Mezzogiorno."
"It is very important for you, but just as important for us in the commission," Trarieux said. "If you do it well, you will give us arguments when the next union budget is discussed."
He explained that the EC is likely to ask for more structural funds. "But for that we need you to be a success," Trarieux said.
It thus appears that the future of EU regional policy in the years to come may well depend to a large extent on this country's ability to fend off corruption.
But that is not the whole story, as Trarieux acknowledged. As serious as the transparency issue is, there is an even more imminent danger of funds being used for political and social ends rather than in ways that would stimulate growth in the most effective manner. The EC representative was understandably keen to play down such dangers, insisting that the commission has successfully developed checks against such a scenario, starting with the programming stage when specific priorities are named to ensure that resources are not wasted on inefficient sectors and enterprises, doomed to failure on the competitive common market. He also pointed to the rules of evaluation and monitoring at the implementation stage, when experts are brought in from the outside to prevent conflicts of interest.
Path of least resistance
But independent experts do not share Trarieux's optimism. While Jacek Szlachta, professor at the Warsaw School of Economics and a leading authority on regional policy in the county, estimates that structural and cohesion funds can increase GDP growth by around 1% per year, there is widespread agreement that not all projects contribute to growth in an equal measure.
"The local authorities are taking the path of least resistance," said Mieczysław Paradowski, director of the pre-accession and structural funds department at the agriculture and rural development ministry. "They know that the easiest way to absorb funds is a big infrastructure project. And that is what they are doing." In contrast, it could take hundreds of small human resources projects to achieve the same level of absorption.
"Unless you have favorable business conditions in place already, building motorways will not solve any problems," Nowicki said.
Tomasz Grzegorz Grosse and Jan Olbrycht of the Institute of Public Affairs agree, and add: "It is imperative that the way of thinking about structural funds is modified. The experience of current member states demonstrates that the level of absorption is less significant than the sensible way these funds are put to use. That is what decision makers and planners should concentrate on."
"I have absolutely no doubt that the focus in the first years after accession will be on absorption, not the quality of the projects," Nowicki added.
With the way things are going now, it is clear that their admonitions will fall on deaf ears.
"How public money is spent is always a political question," said Krzysztof Dzierżawski of the Adam Smith Center. "Now the question is about the quality of those who take political decisions."
Paradowski leaves no room for doubt on that.
"It is true that education determines the level of social and economic development to a greater extent than a new bridge," he said. "But if statistics show that the number of graduates in the region inched up 1%, that is hardly a spectacular success. Everyone will see the bridge. Now guess which one the authorities will go for."
