Claire Charbit

Deputy Head of the Regional Development Policy Division Directorate for Public Governance and Territorial Development OECD

SEMINÁRIO INTERNACIONAL

POLÍTICA REGIONAL NO CONTEXTO GLOBAL: SITUAÇÃO ATUAL E PERSPECTIVAS

Brasilia, 19th March 2013

OECD Study on Regional Development in Brazil

OECD Territorial Reviews: A series of case studies of Regional Development Policy for

Inclusive Growth Among 34 member countries and non member :

18 National Territorial Reviews ( +2 in process)

22 Metropolitan Reviews (+1 in process)

2 National Urban Policy Reviews (+1 in process)

6 Regional reviews (+2 in process)

5 review s on regional innovation systems 9+2 National rural Policy Reviews(+1 in process)

2

Conceptual framework:

1. Diagnosis and assessment (Chapter 1) Measure sub-national trends Identify key strengths and bottlenecks for growth

2. Review of policy instruments (Chapter 2) Are current policies adequate for addressing strengths and

weakness? Identify areas of improvement

3. Multilevel governance (Chapter 3) Identify implementation issues and mechanisms for bridging governance gaps

Why?

What?

How?

1. Key facts

2. Some policy lessons

3. Key governance challenges

4. Conclusions/recommendations

Outline

Despite Brazil’s high levels of concentration in GDP and population …

4

61.754.2

49.547.247.247.046.546.0

45.044.443.943.4

41.841.140.539.7

38.535.8

34.734.5

31.931.3

29.929.7

27.927.6

26.125.825.7

24.1

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

BrazilSwedenIceland

CanadaFinlandGreece

United StatesAustralia

MexicoTurkeyJapanSpain

NorwayKorea

PortugalHungary

OECD averageNew Zealand

United KingdomFrance

BelgiumDenmark

AustriaIreland

GermanyCzech Republic

ItalyNetherlands

Slovak RepublicPoland

Index of geographic concentration of GDP (TL2)

62.052.252.0

47.647.1

44.442.6

41.140.9

39.137.937.636.9

33.333.233.0

31.530.5

26.924.124.023.622.822.221.921.420.820.4

16.416.3

11.1

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

IcelandSweden

BrazilCanada

AustraliaUnited States

FinlandMexicoKoreaJapanSpain

NorwayPortugalGreece

New ZealandOECD average

United KingdomTurkeyFrance

DenmarkGermany

AustriaBelgium

NetherlandsSwitzerland

HungaryIreland

ItalyCzech Republic

PolandSlovak Republic

Index of geographic concentration of population (TL2)

Geographic concentration index of GDP and population (TL2), 2007

50

52

54

56

58

60

62

64

1980 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Concentration index of GDP Concentration index of population

… concentration has been decreasing over the past decades

Despite the recent decline in territorial disparities…

Territorial disparities in GDP per capita among TL2) regions, 2010

0.34

0.30

0.24

0.22

0.18

0.17

0.16

0.16

0.15

0.15

0.15

0.13

0.13

0.13

0.12

0.12

0.12

0.12

0.11

0.09

0.08

0.08

0.06

0 0.1 0.2 0.3 0.4 0.5

Mexico

Brazil

Turkey

Hungary

Czech Republic

Finland

Canada

Italy

United States

Germany

OECD 21 average

Portugal

United Kingdom

Poland

New Zealand

Norway

Australia

Austria

Spain

Sweden

Korea

France

Japan

Gini idex of GDP per capita (TL2)

…in catching-up economies inequality is high and it tends to rise due to the presence of growth poles…

…in Brazil however it is an exception…

0.25

0.26

0.27

0.28

0.29

0.3

0.31

0.32

0.33

19

80

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Brazil (TL2)

… they still remain high in Brazil

Most unsatisfied needs are concentrated in lagging regions

1. The Human Development Index (HDI) is a comparative measure of life expectancy, literacy, education and standards of living for countries worldwide. Note: This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map. 2. This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map. Source: Calculations based on data provided by (1) IBGE, (2) Ministério do Planejamento, Orçamento e Gestão. Estados and (3) CEPAL/ PNUD/OIT (2008) Emprego, desenvolvimento humano e trabalho decente: a experiencia brasileira recente.

Catching up has been driven mainly by advances in resource-intensive regions

Despite Brazil’s faster overall growth …

Growth in GDP per capita among types of TL3 regions, 1995-2007

Brazil OECD

Predominantly rural 4.64% 2.31%

Intermediate 3.14% 1.88%

Predominantly urban 1.58% 1.93%

…urban regions have performed below their potential, recording a lower rate of growth than the average for OECD urban regions

Policies that aim to tap the growth potential of all types of regions is an important source of aggregate growth

This will require a differentiated approach, capable of adapting to the different needs and challenges of regions

Two thirds of national growth

comes from intermediate

(32%) and rural regions (37%)…

y = 0.4664x-1.275

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

15%

16%

17%

Co

ntr

ibu

tio

n t

oO

ECD

gro

wth

TL2 regionsTL3 regions

Sao Paulo

Federal Dist.

Rio de Janeiro

Belo Horizonte

Curitiba

1. Key facts

2. Some policy lessons

3. Key governance challenges

4. Conclusions/recommendations

Outline

with labour mobility

Persistence of inequality

Policy

responses

Human capital formation

Brain drain

11

Isolated sectoral action may have unintended outcomes (example)

A combination of policies is necessary

Sustainable poverty reduction requires creating local jobs and growth

Different policies have complementarities: ex infrastructure + economic +social dimensions

– Need to co-ordinate policies

– Important to target the relevant scale

Regional development policy could reinforce the impact of social policies such as Bolsa Familia

Paradigm shift in regional policies

Traditional Regional Policies New Paradigm

Objectives

Balancing economic

performances by temporary

compensating for disparities

Tapping under-utilised regional

potential for competitiveness

Strategies Sectoral approach Integrated development

projects

Tools Subsidies and state aid Soft and hard infrastructures

Actors Central government Different levels of government

Unit of

analysis Administrative regions Functional regions

Redistributing from leading to

lagging regions

Building competitive regions

by bringing actors together

and targeting key local assets

Resources for regional development are soaring, but target mainly private firms

0

2 000

4 000

6 000

8 000

10 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Resources for Regional Development (R$ million)

FNE FCO

FNO Tax exemptions SUDAM

Tax exemptions SUDENE Tax exemptions AFRMM SUDAM

Tax exemptions AFRMM SUDENE

Source: Sistema de Informações Geranciais dos Fundos Constitucionais de Financiamento (2000-09); IRPJ e

IOF-Coordenação-Geral de Estudos Econômicos-Tributários – COGET/Receita Federal; Relatório de

Execução Territórios da Cidadania Matriz 2008 and Relatório de Execução Plano de Execução 2009 Territories of Citizenship.

Public investment and BNDES funds still face difficulties reaching lagging regions

Southern region8%

Southeast region

60%

Centre-west region

7%

Northeast region

19%

Northern region7%

Federal district1%

Southern region18%

Southeast region

58%

Centre-west region

7%

Northeast region

10%

Northern region7%

Regional allocation of PAC investments (2007-10)

Regional allocation of lending by BNDES in 2010

Source: Relatórios Estaduais. Totals for four years, 2007-10. Source: BNDES website, www.bndes.gov.br.

1. Key facts

2. Some policy lessons

3. Key governance challenges

4. Conclusions/recommendations

Outline

Brazil is among the most decentralised countries both in revenue and spending allocations

AUS BEL

BRA

CAN

CZE

DEN

FIN

FRA

DEU

GRE

HUN

ISL

IRE

ITA

JAP

KOR

LUX NTH

NZL

NOR POL

POR

SVK

SLV

ESP

SWE

CHE

GBR

USA

0,0

10,0

20,0

30,0

40,0

50,0

60,0

0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0

Share of SNGs in Public Spending

Share of SNGs in Public Revenues

‘Mind the Gaps’ : a Tool for a Diagnosis of MLG challenges

Administrative gap

“Mismatch” between functional areas and administrative boundaries => Need for instruments for reaching “effective size”

Information gap

Asymmetries of information (quantity, quality, type) between different stakeholders, either voluntary or not => Need for instruments for revealing & sharing information

Policy gap

Sectoral fragmentation across ministries and agencies => Need for mechanisms to create multidimensional/systemic approaches, and to exercise political leadership and commitment.

Capacity gap Insufficient scientific, technical, infrastructural capacity of local actors => Need for instruments to build capacity

Funding gap Unstable or insufficient revenues undermining effective implementation of responsibilities at subnational level or for crossing policies => Need for shared financing mechanisms

Objective gap Different rationalities creating obstacles for adopting convergent targets => Need for instruments to align objectives

Accountability gap Difficulty to ensure the transparency and integrity of practices across the different constituencies => Need for institutional quality instruments

Brazil faces multilevel governance challenges

Multi-dimensional fragmentation of policies

Sub national governments financial and political autonomy

Institutional and administrative capacity at sub national level

Information asymmetries, monitoring and evaluation

Examples of existing tools for co-ordination

Co-ordinating institutions

Convenios (agreements) and pacts

Regional development agencies

Single Registry, national census, etc.

Central/Federal Government Ministerial Departments

Sub-national Governments

Inter Governmental Council (COAG, Australia)

Regional Agencies (Brazil, Canada,…)

Contracts (France; Italy...)

Special Commission (Delta, Netherlands)

Whatever the type of system – federal, regionalised, unitary – there is a strong need of coordination across levels of government

A wide range of governance mechanisms for vertical coordination of regional development policy

Conditionalities ( EU programming)

Contractual Governance: Some Findings

Contracts among levels of government are unavoidable (vertical interdependencies + assignment of responsibilities)

Contracts allow a customized management of interdependencies, useful in either unitary or federal contexts

Evaluation conditions the appropriateness of the contract

Contracts are tools for dialogue, for clarifying responsibilities, for capacity building

Bilateral commitments must be as « verifiable » as possible

The crucial challenges of enforcement mechanisms to make commitments credible

Towards a diagnosis of sub national capacity challenges

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Planning:Design a portfolio

for growth

Finance and Budgeting:

Ensure adequate resources

Accountability:ensure integrity

during implementation

Evaluation and Audit:

promoting results and learning

Throughout:Facilitating

achievement of goals

• Strategic planning• Cross-sectoral, vertical and cross-jurisdictional co-ordination • Stakeholder engagement; ex ante appraisal

•Multi-year budgeting • traditional and innovative financing instruments• private-sector engagement

• Sound public procurement systems

•Monitoring systems• Ex post performance assessment •Use of performance information

• Integrity, accountability and risk management• Regulatory quality• Professional and technical skills

Critical Capacities

needed at all stages of the investment

cycle

Institutions matter

24

1. Sub-national governments (SNGs) are responsible for close to three-quarters of total public investment in the OECD.

2. The quality of government (QoG) at regional level varies within and across countries.

3. QoG is strongly related to sub-national human development indicators at regional level.

4. Better QoG is also associated with better returns to cohesion investments in places with relatively large cohesion expenditure.

5. The strong association between QoG and levels of both income and education reinforces concerns about SNG capacity challenges.

Source: N. Charron, V. Lapuente and L. Dykstra (2012.) “Regional Governance Matters: A Study on Regional Variation in Quality of Government within the EU” (forthcoming Regional Studies).

Ingredients for successful commitments, enforced on the ground

Implementation of effective contract for

regional development

Capacity building

Evaluation Third party control

From sanction to reputational mechanisms

1. Key facts

2. Some policy lessons

3. Key governance challenges

4. Conclusions/recommendations

Outline

Key conditions for effective regional development

Give to this policy high visibility and long term commitment

Adopt place-based policies

Enhance the effectiveness of vertical and horizontal co-ordination mechanisms

Involve local actors

Recommendations

1. Brazil could develop a place based approach that

would achieve higher complementarities between

social and other sectoral policies

2. Brazil is using a lot or regional development funds to

remediate the difficult access of private enterprises to

financing. Over time, it would be better to use

regional funds for their specific purposes of investing

in soft and physical investment with regional

development targets

.../...

Recommendations (2)

3. Government should contemplate new instruments to make sure that public funds reach lagging regions (capacity building, technical assistance, joint projects, etc.)

4. The OECD supports the move to complementing the Bolsa Familia programme with related programmes for promoting social and economic inclusiveness of the extreme poor

5. There is a proliferation of co-ordinating bodies without much effective co-ordination mechanisms. An institutional streamlining is required with a clear identification of the co-ordination gaps. The resulting institutions should have effective instruments to operate.

.../...

Recommendations (3) 6. The status of regional development agencies needs to

be clarified, as currently, they do not provide the co-

ordination mechanisms that they are supposed to

deliver

7. Need to simplify and unify the administrative map of

Brazil at the intermediary level between municipalities

and states

8. Make use of the information generated by universal

programmes such as Bolsa Família (Indice de Gestão

Decentralisada)or the School Census to better target

regional policies

.../...

Recommendations (4)

9. Sustain and enlarge programmes for capacity building

at the state and municipal level. In most countries, this

is the main bottleneck for the successful

implementation of regional development policy. It

largely depends on evaluation processes.

Obrigada!

Claire.Charbit@oecd.org

32