Perspective_politice_2015_decembrie.qxd Regionalization, Competitiveness and innovation. The case of Romania1 Abstract: It is known that as of 1998 Romania has started a Top-Down process of regionalization. The main purpose of this process was to subdivide the national territory according to the criteria of the NUTS classification used in the European Union both for statistical purposes and as a dimension to ac- cess EU fundings. Within this framework the paper aims to assess the development of the competitive- ness of the “new” Romanian regions with a particular focus on innovation seen as a determining fac- tor. For this purpose are mainly used the data shown in the last report on the Regional Competitive Index, by making comparisons with the different European countries and their regions. It emerges that even in a context of progress towards a higher competitiveness, regions in Romania show a substantial deficit in terms of innovation. This condition seems to be indicative of a structural weakness of the in- novation process related to both the regional economic structure and to the system of R & D. To keep up with the other European regional economies is crucial that significant efforts are made in the direction of promoting innovation and thus competitiveness also to improve integration in the dynamics of the Eu- ropean economy. Keywords: Romania, romanian regions, regional competitiveness, Regional Competitiveness Index (RCI), territorial innovation. 1. Regionalization and development in Romania After 1990, the Romanian economy has entered a complex restructur- ing process aimed at enhancing both economic efficiency and the adaptation of the country to the needs of the market economy (Con- stantin et al., 2011). Among the political and economic transformations that have been developed following the post-revolutionary events, there is a new model of regional development policy, which led to the creation of an ad hoc institutional and legal framework, as well as specific implementation mechanisms. In a rel- atively short time, the regional development policy in Romania has become an integral part of the process of European Union accession, taking the role of a separate chapter of negotiation in the EU accession process, i.e. Chap- ter 21 „Regional policy and coordination of structural instruments“. On the basis of the association agreement to the EU as well as the National Program for EU accession in the period 1998-1999, and with the support of the PHARE program, they have been developed, both at central and regional level, a suitable legal framework and adequate in- stitutional structures by recognizing, therefore, the need for an inte- grated and modern regional development policy. These institutional structures are a means to support the local economic and social poten- Vittorio Amato University of Napoli Federico II, Department of Political Sciences Perspective_politice_2015_decembrie.qxd 12/13/2015 4:51 PM Page 15 tial through cooperation between national, regional and local authorities, and benefit from fi- nancial support from the government and the European Commission (Constantin, 2009). Law 151/1998 on regional development in Romania – the basic law which regulates this issue – sets the objectives, institutional framework, skills and tools necessary to promote the regional development policy. This law, which was amended by subsequent 143/2003, also de- fines the decision making and executive bodies at both regional and national levels. Figure 1. GDP per capita in the Romanian NUTS 3 regions in 2011 (average EU-28 = 100). Source: Author’s calculations on EUROSTAT data. As a result of this legislation, have been created 8 „statistical“ and/or „of development“ re- gions corresponding to NUTS 2 level, resulting as geographical areas that are not, therefore, considered as administrative units. The „development regions“ have been formed by the ag- gregation of existing provinces into a superior territorial level, and they have been named ac- cording to their geographical position in the country (Table no. 1). Subsequently, with a further grouping of the eight regions, have been created four macro- regions corresponding to the NUTS 1 statistical level. Within the Romanian regional NUTS structure, only the territorial units of NUTS 3 type (namely the 41 provinces and the area of Bucharest) have competencies as administrative authorities. The macro-regions and the de- velopment regions have no administrative powers nor their own form of government or ad- ministration. The Romanian regions, therefore, have not been invested by decision-making skills of a territorial nature but they have only been configured as statistical units of NUTS 2 level – stan- dard units with an average size of 13,000 square kilometers and a population of about 2.5 mil- lion inhabitants. 16 Perspective politice Perspective_politice_2015_decembrie.qxd 12/13/2015 4:51 PM Page 16 Table 1. Macroregions and regions of Development in Romania. Source: Author’s elaborations Based on the provisions of Law 151/1998. The Romanian „formula“ of regionalization can therefore be seen as a kind of co-operation between local communities consisting in the union of sub-national governments in 8 regions of development, thanks to the voluntary cooperation of the 41 existing provinces and without legal personality at regional level. In other words, the type of regionalization adopted in Ro- mania – definable as administrative decentralization (by delegation) – does not imply admin- istrative functions for the regions, and therefore does not change the administrative organiza- tion of the territory by forming regions seen as new territorial communities superior to the existing ones. (Dodescu and Chirilã, 2012). This aspect makes the difference between the type of regionalization adopted in Romania compared to more advanced forms of regionalization seen in many other EU countries, for ex- ample, France (administrative regionalization), Italy and Spain (political regionalization) Ger- many, Belgium and Austria (regionalization of the federal authorities). Limited both in terms of resources and competences, the Romanian regions of development have been therefore cre- ated more as a functional response to the needs of EU regional policy (in terms of the criteria for the use of structural funds) as well as observation statistical unit in order to allow the col- lection of data in accordance with regional standards and policies of the European Union (Kat- sarova, 2010), rather than for broad regional functions and objectives such as infrastructures, environmental protection, cultural heritage, etc… This choice, as we will see later through a set of indicators, it is probably related to the in- adequate performance both economic and of implementation of adequate milieux, which came with Romania at regional level. If, in fact, the country has registered as a whole satisfactory economic performances with considerables growth rates of GDP, these do not seem to have re- flected uniformly and satisfactorily on its territories. In order to understand this dynamic, in the following paragraphs are analyzed at the regional scale both the competitiveness and the ability of innovation occurring in the regions of Romania. 2. Competitiveness: problems of definition and interpretation at the regional scale In a broad sense, competitiveness can be defined as the ability of a country, measured in rela- tion to the performance of other countries, to build and ensure an economic, social and politi- decembrie 2015 17Perspective politice NUTS I Macroregion I Macroregion II Macroregion III Macroregion IV NUTS II North-West Centre North- East South- East South- Muntenia Bucharest -Ilfov South- West West NUTS III Bihor Alba Bacau Braila Arges Bucharest Dolj Arad Bistrita- Nasaud Brasov Botosani Buzau Calarasi Ilfov Gorj Caras- Severin Cluj Covasna Iasi Constanta Dambovita Mehedinti Hunedoara Maramures Harghita Neamt Galati Giurgiu Olt Timis Satu Mare Mures Suceava Tulcea Ialomita Valcea Salaj Sibiu Vaslui Vrancea Prahova Teleorman Perspective_politice_2015_decembrie.qxd 12/13/2015 4:51 PM Page 17 cal contex able to efficiently support the creation of added value. At the national level, compet- itiveness also involves a „territorial dimension“, being the geographical spread of competitive economic operators rather uneven, but usually concentrated in certain areas of the country. As regards this aspect, the extended concept of competitiveness also entails defining its rel- evant limits. The traditional analysis of competitiveness usually distinguishes three levels: country, industry and society (Porter, 1990;. Reiljan et al, 2000), while the latest works tends to include the role of regions and supranational organizations (Reiljan et al., 2000). At the re- gional level, competitiveness must contemplate the fact that, regardless of the presence in its territory of actors or structures competitive and non-competitive, certain elements in all re- gional contexts have an impact on the competitiveness of enterprises that are localized. Such items include, among others, the social and physical infrastructure, qualification of labor and the efficiency of public institutions. The complexity of regional competitiveness was also interpreted through an analytical de- composition into four levels (developed by Esser in 1995 and presented by Annoni and Ko- zlovska in 2010 in their report on the index of regional competitiveness of the EU), in which they different types of drivers of competitiveness operate. a) The micro level: where the drivers of competitiveness are identified with the efforts of companies and their collaborative networks; b) the medium level, which aims to create a fa- vorable environment for businesses, here drivers of competitiveness are identified with the physical infrastructure, the sectoral policies of competitiveness (education and R & D, indus- trial policy, environmental policy, export promotion), but also with the territorially oriented policies (regional policy, localization, promotion of the territory), c) the macro level: includes macroeconomic, political and legal framework that encourages competition. Its key factors are the monetary, fiscal and tax policies and commercial exchange, competition policy and con- sumer protection and d) the meta-level: the trajectories concerns the main societal directions, where the drivers are identified by a competitive economic system, the ability to develop vi- sions and strategies, value systems that encourage learning and change, the collective memo- ry, social cohesionad capital and the social status of entrepreneurs. At the regional, sub-regional and local scale, the four levels are connected to each other, even though their degree of importance is different. However, is interesting the fact that late- ly – in the territorial realities – significance of the meta-level seems to have assumed a greater role in relation to the choice of their pathways and methods of development, especially in the medium and long term. Finally, we should mention the most recent definition proposed in the report on the EU Re- gional Competitiveness Index 2013, which incorporates both the vision of the company and that of people who are located or live in a region: the regional competitiveness can be defined as “the ability to offer an attractive and sustainable environment for firms and residents to live and work”, where for sustainability must be understood the ability of a region to provide an attractive environment both in the short and in the long term (Annoni and Dijsktra, 2013). 3. Competitiveness in the Romanian regions. In literature you can find different ways to evaluate regional competitiveness. One of the most often used criteria is the one concerning composite and/or aggregate competitiveness indica- tors. It should however be specified that can be difficult to build an aggregate indicator to as- sess regional competitiveness from its defining elements. This is because it is not easy to 18 Perspective politice Perspective_politice_2015_decembrie.qxd 12/13/2015 4:51 PM Page 18 choose what to include in such an index, because of evanescence and not direct observability of the concept itself. In addition, all relevant indicators to define competitiveness are inter-re- lated, making it difficult to assess causality, although attempts may be made to distinguish be- tween drivers of competitiveness and its outputs (Camagni, 2002). Many studies calculate indices of global competitiveness, considering mostly the national level (for example, those calculated by the World Economic Forum and the International Insti- tute for Management Development). Besides these, other studies analyze regional competitive- ness using fewer indicators than indices of national competitiveness. Amongst these are the Eu- ropean Competitiveness Index (ECI), the United Kingdom Competitiveness Index, the World Knowledge Competitiveness Index (developed by the Centre for International Competitive- ness), the Atlas of Regional Competitiveness (of Eurochambers) and, in relation to the specific case of Romania, both the Regional Competitiveness Index developed in 2007 by the Group for Applied Economics, and the Regions’ Competitiveness Index developed in 2011 by IRECSON. Based on the methodology used by the World Economic Forum which publishes the annu- al Global Competitiveness Report, an index of competitiveness at the regional level for the NUTS-2 regions has been prepared by the EU. It is based on 11 pillars (areas) and 73 indica- tors organized in three groups (basic skills, efficiency drivers and drivers of innovation) cov- ering a wide range of factors not solely linked to the economic aspects. The structure of this indicator is shown in Table 2. Table 2. Typology of sub-indices and dimensions within the Regional Competitiveness Index. Source: Annoni and Dijkstra, 2013. The areas from a1) to a5) have a higher importance for the less developed regions, while those from c1) to c3) counts more for the most advanced regions (in particular for those with a very high level of development), but also for the regions in transition from a lower phase of development to a higher one. For each area a score is calculated as the average of standardized indicators (some indicators are calculated only at the national level), and the final score (total RCI) is calculated as a weighted average of the three fundamental pillars. Because different indicators have a different impact on the competitiveness of regions with regard to their respective levels of development, the weights applied to the three groups of decembrie 2015 19Perspective politice a) Basic sub-index a.1 Institutions a.2 Macroeconomic stability a.3 Infrastructure a.4 Health a.5 Basic education b) Efficiency sub-index b.1 Higher education b.2 Labour market efficiency b.3 Market size c) Innovation sub-index c.1 Technological readiness c.2 Business sophistication c.3 Innovation Perspective_politice_2015_decembrie.qxd 12/13/2015 4:51 PM Page 19 drivers have been correlated with the regional GDP per capita (3 classes of weighting in the 2010 version and 5 classes in 2013 version). This criterion can also provide useful input to pol- icy makers, because, theoretically, the competitiveness of a less developed region can be in- creased, for example, by augmenting the quality of institutional and educational factors affect- ing innovation. Table 3. Weights of the sub-indices of the drivers of competitiveness of RCI, version of 2013. Source: Revised from Annoni and Dijkstra, 2013. This aspect has been recognized by the authors of the RCI report, which have increased the weight of the drivers of innovation even in the case of the less developed regional economies, in order to reward in those regions the innovation policies (Annoni, Dijkstra, 2013 ) (Table 3). In the European Union, the regional competitiveness index (RCI) shows a remarkable char- acterization of the regional level in relation to competitiveness and this is true both among Member States and within them. It is possible to detect large differences between the group of most developed states (EU-15) and the least developed, identified in the New Member States (NMS-13), also regarding the territorial distribution of the drivers of competitiveness and the channels of its spread among the regions. Top 10 most competitive regions are located in the EU-15 countries (more precisely, in seven countries: the Netherlands – 3 regions, United Kingdom – 3 regions, Sweden, Germany, France and Denmark – 1 region each). At the other extreme, the 10 less competitive regions can be finded in an EU-15 country (Greece – 5 regions) and in the group of the least devel- oped NMS-13 (Romania – 3 regions and Bulgaria – 2 regions) (Figure 2). Considering the three main areas of RCI, the situation does not change much, even if the number of countries varies within higher limits. Unfortunately, in the case of the fundamental pillar „skills“ almost all the Romanian regions are among the 10 European less competitive re- gions, while in the case of the innovation drivers pillar six regions of Romania are just as un- favorably positioned. The general interregional competitiveness gaps in EU countries are of a higher magnitude in the case of the EU-15 countries than in the case of the NMS-13, but considering the three domains the situation is different (Tables 4 and 5). So, while in the case of the basic skills pil- lar gaps between regions are similar in the two groups of countries, in the drivers of efficien- cy pillar, gaps between regions are a bit higher in the EU-15 countries, and in the context of drivers of innovation highest gaps between regions are accounted for the NMS-13 countries (in particular from Romania). Per capita GDP in relation to EU average Development stage Basic competencies pillar Efficiency drivers pillar Innovation drivers pillar <50 1 35,00% 50,00% 15,00% 50-75 2 31,25% 50,00% 18,75% 75-90 3 27,50% 50,00% 22,50% 90-110 4 23,75% 50,00% 26,25% >110 5 20,00% 50,00% 30,00% 20 Perspective politice Perspective_politice_2015_decembrie.qxd 12/13/2015 4:51 PM Page 20 Figure 2. Regional Competitiveness index in the UE in 2013 at NUTS 2 level. Source: Author’s calculations on EUROSTAT data As for the specifics of Romania, except for the Bucharest-Ilfov region, all other regions are positioned among the least competitive of the European Union (ranks lower than 240 among 262 positions), and the South East region is classified as the penultimate among the European Union (the lowest score of overall competitiveness between regions in the new Member States, next the region Severozapaden of Bulgaria as early as 2010). In addition, in the case of some sub-indices of the competitiveness pillar, is to be found at least one Romanian region among those placed in the last position among the NMS regions or even throughout the EU: all Romanian regions in the case of the basic education, the region Bucuresti-Ilfov in the case of institutional quality, the region of Sud-Vest Oltenia in the case of infrastructure, the region Vest in the case of the basic skills pillar, the South East region, in the case of health care, higher education, lifelong learning, efficiency of the labour market as well as in the areas of efficiency drivers and drivers of innovation, the Northeast region, in the case of market size, technological readiness and the innovation drivers pillar, finally the South Muntenia region in the case of business sophistication. decembrie 2015 21Perspective politice Perspective_politice_2015_decembrie.qxd 12/13/2015 4:51 PM Page 21 Table 4. Differentials of interregional competitiveness in the area of EU-15 countries. Source: Author’s elaborations on data Annoni and Dijkstra, 2013. Table 5. Differentials of interregional competitiveness in the area of NMS-13 countries. Source: Author’s elaborations on data Annoni and Dijkstra, 2013. Can also be noticed that the Bucharest-Ilfov region (the most developed in Romania, with the highest competitive position – except in the field of basic skills) is surrounded by much less competitive regions (South Muntenia, South-East and South-Vest Oltenia), which reveals a concentration of the drivers of competitiveness in its territory and the limited nature of the dissemination of competitiveness. This is caused both by the poor quality of transport infras- tructure and, above all, by the significant gaps regarding the structure and sectoral dynamic as well as the development of economic activities and innovative approach. Indeed, the region Bucuresti-Ilfov is included between the regions in the development stage 4 (ie, in transition to an innovation driven economy), unlike the others, included between the regions in the second stage of development (or in transition to an efficiency-driven economy 22 Perspective politice Country Basic competencies pillar Efficiency drivers pillar Innovation drivers pillar RCI 2013 Bulgaria 1,80 1,94 3,83 2,15 Czech Republic 1,13 1,45 1,94 1,42 Croatia 1,03 1,14 1,03 1,08 Hungary 1,27 1,62 2,01 1,65 Poland 1,42 2,08 2,64 1,61 Romania 1,60 3,15 7,03 3,25 Slovenia 1,02 1,19 1,42 1,19 Slovakia 1,29 2,57 2,35 2,11 Country Basic competencies pillar Efficiency drivers pillar Innovation drivers pillar RCI 2013 Belgium 1,32 1,42 1,70 1,45 Denmark 1,05 1,32 1,63 1,32 Germany 1,23 1,47 1,67 1,46 Ireland 1,03 1,23 1,24 1,20 Greece 1,80 3,39 3,80 2,80 Spain 1,22 5,23 2,47 2,75 France 1,64 3,52 2,57 3,64 Italy 1,37 2,93 1,92 1,94 Netherlands 1,13 1,43 1,59 1,35 Austria 1,12 1,20 1,52 1,17 Portugal 1,21 2,04 2,17 1,77 Finland 1,06 1,34 1,61 1,22 Sweden 1,13 1,54 1,98 1,52 United Kingdom 1,33 1,83 3,04 1,66 Perspective_politice_2015_decembrie.qxd 12/13/2015 4:52 PM Page 22 – the region Vest) or even in the early stage of development (economies guided by basic skills – all the other regions of Romania). Figure 3. Regional Competitiveness Index in Romania in 2013 at NUTS 2 level. Source: author’s calculations on EUROSTAT data 4. Innovation in Romanian regions Since innovation is a key factor of competitiveness, both at national and regional level, it is appropriate to examine in closer detail some of the problems. The regional performance in terms of innovation in the EU regions was evaluated by the Regional Innovation Scoreboard (RIS); here the regions of the EU member countries have been classified as follows, in four performance groups: the innovation leaders (34 regions), innovation followers (57 regions), average innovators (68 regions) and modest innovators (31 regions). Although the regional innovation performance can vary widely within a country, generally in Europe groups of regional performance are correlated with the national ones. The data show a clear division of innovativeness between countries (and regions) in North and Western Eu- rope, and those in southern and eastern Europe. Romania has only one region that surpasses the class of modest innovators (the region Bucuresti–Ilfov, included in the group of medium innovators) in line with the competitiveness performance of Romanian regions. The regions definable as innovation leaders record the best performance in relation to all the indicators in the analysis, to an extent of about 30% above the European average, while the regions classified as modest innovators record the lower trend, in particular as regards the per- formance relative to business innovation. decembrie 2015 23Perspective politice Perspective_politice_2015_decembrie.qxd 12/13/2015 4:52 PM Page 23 Despite the presence in such regions of a highly skilled and educated workforce, they ex- perience both the main weaknesses related to other fields of regional innovation systems, and the negative impacts due to the obstacles that arise from national R & D systems of their own countries. In the case of the Romanian regions, the evolution of the gaps of the overall perfor- mance of innovation between 2004-2010 was positive for six of the eight development re- gions, except for Sud-Vest Oltenia and Vest regions which recorded negative average annual growth rates of R&D between -2.5% and 0%. The best evolution of the performance of inno- vation have been recorded by Bucharest-Ilfov, Muntenia Sud, Sud-Vest and Nord-Vest regions. When analyzing the performance of the Romanian regions in relation to individual indica- tors of R&D it can be noted that most of them have registered performance of 50% below the level of the European average for all indicators. Paradoxically, some of the regions with lower development levels (Nord-Vest, Sud-Vest Oltenia) reported slightly better performance for some indicators related to a greater extent with the capacity for innovation and the ability of trading innovation performance compared to regions with a higher level of development (Vest, but also Bucuresti-Ilfov) which, vice versa, have registered a lower performance. However, all in all, the weaknesses of the innovation process in Romania, due to both the national system of R & D and company structures and their internal relations, are also true at the regional level. This requires action in several fields (political, economic, institutional, so- cial and entrepreneurial) in order to overcome the current unfavorable situation and build the foundations for a change in thinking and operating in the very near future. Note 1 This paper is part of a broader research on regional development in Romania carried out during a peri- od of Research Fellowship in 2015 at the National University of Political Sciences and Public Administration in Bucharest (NUPSPA). I thank Professor Andrei Taranu for the support. References 1. Annoni P., Kozovska K., (2010), EU Regional Competitiveness Index 2010, Joint Research Centre and DG Regional Policy. 2. Annoni P., Dijkstra L., (2013), EU Regional Competitiveness Index 2013, JRC Scientific and Policy Re- ports, European Commission, DG for Regional and Urban Policy. 3. Boldea M., Parean M., Otil M., (2012), Regional Disparity Analysis: The Case of Romania, Journal of Eastern Europe Research in Business & Economics, Vol. 2012. 4. Centre for International Competitiveness (various years), European Competitiveness Index, available on: http://www.cforic.org/pages/european-competitiveness.php. 5. 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