August 30, 2013

A hopefully inspiring guide to European Union's economic development solutions

The European Union has a sophisticated, old and large scale economic development system. For non-Europeans, it can serve with some pretty news.


The European Union is not (yet) a country. If it was a country, it would be the largest economy of the world. Originally the EU was founded as a free trade zone, and most of the European (lets say: federal) policies are connected to economy.
The EU budget cycle is 7 year long, the next cycle will start in 2014. As you can see on the graph (above), 'cohesion', 'competitiveness' and 'rural development' have the major (and increasing) budget share. In the EU slang, these terms mean a tax transfer from the developed (mostly Northern European) member states to underdeveloped (mostly Southern ans Eastern European) member states  - to develop their economies. So, the EU 'federal' budget cannot compared to the US federal budget, but it's impact on economic development is critical. Let see briefly, how does it work.

National development plans. Every member state have a complex economic development plan for the budget cycle, and a contract with European Commission (the 'federal government') how to spend the money (also the donor states, but they pay more into the the EU budget than they get back). Every member state can define its own development plan and concept, however the EU has focus points (e.g: between 2014-20: energy, innovation, small enterprise development).

Operative Programmes. The national development plans are divided to operative programmes. On this point let's make it clear: 'economic development' in Europe is a much larger category than in the US. The American (and off-European) economic development mostly means attracting companies and jobs to our location. In Europe, we call this activity 'investment promotion' - a very thin slice of economic development. The European economic development involves every potential activities from supply chain developments to small enterprise development, from innovative education projects to community building, from applied recearch support to start-up financing etc. National operative programs, based and the national development plan, focus on some of these areas, e.g: between 2014-20 in Hungary, we will have operative programmes on economic development and innovation, regional development (development of economic environment of cities and counties), HR development, rural development (development of the business environment of agri-business) , transportation, energy and environment. The Hungarian budget for 2014-20 is approx. €25 billion, and 60% of it will go to economic development (for 3 operative programmes: economic development and innovation, regional development, rural development).

Economic development projects. If the member states finalized the national development plans and operative programmes, the management authorities (member state ministries, mostly) will make a call for application in every operative programme. Each economic players (businesses, municipalities, universities, NGOs etc) can apply for funding for their development project. E.g: a municipality-owned business park I work for, will apply for a renewable energy power plant, which produce green energy for local public lighting and waste steam for newly established glasshouse organic horticultures. Another project will support the market expansion of these small, organic horticultures, another will focus on place branding to promote our location internationally (investment promotion).

European Commission's initiatives. Not all economic development money from EU budget goes to member states. The European Commission has its own iniviatives, involving urban development (city branding best practices exchange, advisory, funding etc), business support, research information service and more.

Now lets see short video about a business incubator in Barcelona, Spain:

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